New information on the Credit Card Accountability Responsibility and Disclosure Act has saved American consumers billions of dollars on late fees, but many financial experts are saying that credit card companies aren’t entirely consumer-friendly yet.
According to Reuters and TIME, the legislation (known as CARD) was put into place as a cushion for consumers following the 2008 financial crisis. Between 2011 and 2014, consumers have avoided approximately $20 billion in unnecessary credit card fees, said the Consumer Financial Protection Bureau.
CARD prohibited credit card companies from raising rates or fees without informing cardholders in a clear and concise manner, and it required that companies make credit card bills easier for consumers to understand.
Americans saved an estimated $7 billion in late fees during the past few years because they were paying fewer late fees; the average late fee decreased by 20% because companies were required to keep late fees “reasonable and proportional.”
Another $9 billion of savings came from reduced over-limit fees. As TIME explained, credit card issuers previously would authorize purchases for cardholders which would exceed an individual’s credit limit, and they would do so without informing the individual (but would immediately slap on a $35 over-limit fee). According to CARD regulations, the issuing companies must inform cardholders that a transaction will put them over their credit limit, and then must give cardholders the option of continuing or cancelling their transactions.
Along with reduced late fees, said Business Insider, consumers also saved around $4 billion in other fees, such as balance-transfer fees, cash-advance fees, and add-on fees.
The $20 billion savings equals approximately $5 billion of avoided fees per year, and that doesn’t seem like very much considering that American consumers spent about $4.6 trillion via credit and debit cards in 2013 alone.
Critics of CARD argued back in 2009 that the strict regulations would make it difficult for consumers to take out lines of credit, but as TIME noted, there were 100 million card accounts opened in 2014 and available credit has increased by 10% from 2012.
The legislation certainly helped build consumer confidence back up, but economists are worrying that the drastic spike in confidence could mean that consumers are less skeptical of other shady practices. The majority of consumers select their credit cards based on rewards programs, for example, but CARD doesn’t require companies to disclose information on rewards programs fully.