The overall costs of owning a credit card have decreased since a landmark act was implemented three years ago, according to a study released by the Consumer Financial Protection Bureau.
The agency said Wednesday that the Credit Card Accountability, Responsibility and Disclosure Act of 2009 -- which went into effect in 2010 -- was successful in lowering penalty fees by greatly restricting over-the-limit fees and capping the size of late fees.
"The elimination of fees speaks to one of the CARD Act's successes," says Michael Misasi, senior analyst at Mercator Advisory Group. "One of the major objectives is to make consumers more aware of events that would trigger these fees and make credit cards more transparent."
Consumers shelled out $2.5 billion less in over-the-limit fees last year than in 2008. Similarly, they paid $1.5 billion less in late fees over the same period. The reduction in penalty fees more than offsets an increase in interest rates and annual fees since the CARD Act's implementation.
The average annual percentage rate, or APR, for variable-rate credit cards stands at 15.31 percent, up from 14.3 percent before the CARD Act was enacted in 2010, according to Bankrate's weekly interest rate data. Annual fees averaged $113 last year, up from $80 in 2010, according to Ipsos Loyalty, a research services company.
Even with that data, the CFPB found the total cost of credit declined.
The CFPB study also noted that the act's provisions to protect younger consumers are working. The percentage of young adults between 18 and 20 years old who have at least one credit card has dropped by half since the act's implementation.
Despite the successes, the agency pointed out that it's watching other practices in the credit card industry the act didn't address. That includes add-on products, fees charged before an account is opened, balance transfer promotions and online disclosures or disclosures concerning rewards programs or grace periods.
The CFPB has already fined Discover, Capital One and Chase over how they marketed and delivered certain add-on products such as identity-theft protection and credit monitoring. It also ordered the trio to refund consumers who were affected by their transgressions.
Last year, the CFPB also proposed allowing credit card issuers to charge an unlimited amount before a card account is opened, such as an application fee, in response to a court ruling. But it's keeping an eye on these fees and could take action if necessary.
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