CFPB Report Confirms 2009 Credit CARD Act Works to Protect Consumers

Statement of U.S. PIRG Consumer Program Director Ed Mierzwinski (Excerpted from his invited testimony) at the CFPB Field Hearing on the Credit CARD Act Harold Washington Library, Chicago, Illinois

U.S. PIRG

“Today’s CFPB report on the Credit CARD Act of 2009 confirms that the law has cleaned up the worst tricks and traps that riddled the credit card marketplace. Those traps saddled consumers with unfair penalty fees and high penalty interest rates, ultimately leading to massive and unsustainable credit card debt and even bankruptcies. For example, one of the worst practices was both charging you a late fee and raising your interest rate from typical market rates of 12-18%  to 36% APR for being as little as one day late. The CFPB report found that even though interest rates have risen slightly, the cost of credit to consumers has declined 2 percentage points because they are saving billions of dollars as they pay lower penalty fees and pay them less often. The report also found that the CARD Act’s special protections for students and other young people are working.

“However, more work must still be done to clean up the credit card marketplace. In particular, the marketing of unfair add-on products has been the subject of three major enforcement actions where companies were forced to return nearly $800 million in refunds to consumers. High-cost, low-balance fee harvester credit cards targeted at previously bankrupt consumers are also a problem. But enactment of the CARD Act was an enormous step forward to put money back in consumer pockets. Its success shows that good regulation makes markets work better.”

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U.S. PIRG, the federation of state Public Interest Research Groups, is a consumer group that stands up to powerful interests whenever they threaten our health and safety, our financial security, or our right to fully participate in our democratic society.