CARD Act Saves Consumers Billions in Penalty Fees - Legal News


ADVERTISING DISCLOSURE: is an independent, advertising-supported web site. receives compensation from most credit card issuers whose offers appear on our site. Compensation from our advertising partners impacts how and where their products appear on our site, including, for example, the order in which they may appear within review lists. has not reviewed all available credit card offers in the marketplace.

Credit Card Applications » News » Legal » CARD Act Saves Consumers Billions in Penalty Fees

CARD Act Saves Consumers Billions in Penalty Fees

CARD Act Saves Consumers Billions in Penalty Fees
The content is accurate at the time of publication and is subject to change.

Credit card holders could have been charged $2.5 billion more in overlimit fees if the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) had not been signed into law in 2009, according to the Consumer Financial Protection Bureau.

The CFPB, the government agency that has overseen the CARD Act since July 2011, released a report last month detailing the changes that have taken place since its implementation.

The CARD Act does not allow credit card issuers to charge overlimit fees unless customers opt-in to the practice. Before the Act, issuers could allow cardholders to go over their credit limit and then charge them a fee.

The CFPB report calculated overlimit penalty fee rates at their 2008 level and the number of overlimit occurrences at their 2007 level, to estimate that consumers would have paid $2.5 billion more in 2012 if the Act had not been adopted.

Late fees, too, have been greatly reduced since the CARD Act. It called for penalty fees to be “reasonable and proportional” to the infraction. Post-CARD Act, the average late fee is $6 lower, translating to an estimated $1.5 billion drop in late fees in 2012.

Overall, the cost of credit is down by two percentage points since 2008. These costs include not just fees, but interest and finance charges as well. And there is plenty of available credit to go around–$2 trillion worth, according to the CFPB.

The wide availability of credit is due in part to the fact that credit issuers can no longer raise cardholders’ credit limits on their own, according to the report. Instead, consumers must call to request a higher limit. Since many do not, more credit is available.

A separate report concluded that the CARD Act reduced the cost of credit to the tune of $20.8 billion per year. University of Chicago Booth School of Business professor Neale Mahoney and NYU Stern professor Johannes Stroebel’s paper, Regulating Consumer Financial Products: Evidence from Credit Cards, supported the CFPB’s claim that the CARD Act is saving money for consumers.

Disclaimer: This editorial content is not provided or commissioned by the credit card issuer(s). Opinions expressed here are the author's alone, not those of the credit card issuer(s), and have not been reviewed, approved or otherwise endorsed by the credit card issuer(s). Reasonable efforts are made to present accurate information, however all information is presented without warranty. Consult a card's issuing bank for the terms & conditions.
All rates and fees, and other terms and conditions of the products mentioned in this article/post are actual as of the last update date but are subject to change. See the current products' Terms & Conditions on the issuing banks' websites.
Add to Favorites:

Related News:

CFPB Taking a Hard Look at Credit Card Issuers
CFPB Taking a Hard Look at Credit Card Issuers

Posted: September 10, 2014

Honesty is the best policy when marketing special interest rate promotions, was the message that federal regulars delivered to U.S credit card issuers, believing that some may be engaging in deceptive marketing practices. Continue reading

Feds Seek Input on Safe Student Scorecard
Feds Seek Input on Safe Student Scorecard

Posted: January 16, 2015

The Consumer Financial Protection Bureau (CFPB) is creating a tool to help colleges and universities evaluate financial products before they decide which companies to partner with. Continue reading

Chase Cardholders Refunded for Credit Services
Chase Cardholders Refunded for Credit Services

Posted: September 23, 2013

Over two million Chase credit card account holders who were charged for credit monitoring services will soon be getting a check in the mail, if they haven’t already. Continue reading

Get the latest news, articles and expert advice delivered to your inbox. It's FREE.
Earn 5% cash back at different places each quarter like gas stations, grocery stores, restaurants, and more up to the quarterly maximum, each time you activate.
For Excellent, Good Credit
INTRO OFFER: Discover will match ALL the Miles you've earned at the end of your first year, automatically. For example, if you earn 30,000 Miles, you get 60,000 Miles. That's $600 towards travel!
For Excellent, Good Credit
Earn unlimited 1.5% cash back on every purchase, every day
For Average, Fair, Limited Credit
You've successfully subscribed!

Please specify the following:All these fields are optional

Your Credit History
Themes you are interested in:

By providing this information you help us make our news letters more useful and informative. Thank you!