On May 22nd, 2009, President Barack Obama put his stamp on one of the most significant pieces of credit-related legislature in recent history. The Credit Card Accountability Responsibility and Disclosure Act (known simply as the Credit CARD) Act served as our country’s most robust revamp of credit regulation to date.

With hindsight’s benefit, it’s easy to see why the Credit CARD Act was a necessity at a time when the industry was accelerating toward a dangerous path. Hidden fees, unpredictable interest rates, and unsustainable promotions were leading to irreparable damage to the trust between credit card companies and their customers.

But what exactly did the law change? And perhaps more importantly, how did the average cardholder benefit from it?

The immediate pros and cons of the Credit CARD Act

When the law eventually came into effect, we knew the Credit CARD Act was coming with some major benefits for credit card holders. Intentional or not, the American public felt the fine print on their contracts was getting finer, and compelled Washington to enact a newer, more modern set of regulations that reflected the existing state of the credit industry.

The pros:

  • Rate increase restrictions: Credit card issuers would now be mandated to alert customer at least 45 days in advance of any interest rate hikes
  • Fee restrictions: Credit card issuers would only be permitted to charge one over-limit fee per billing cycle.
  • Payment allocation relief: Payment allocation relief is where credit card issuers would be required to apply cardholder payments to their highest interest rate balance first.
  • Deadline relief: Credit card issuers would need to allow at least 21 days from the time they mail a bill for a cardholder to pay it off.
  • Gift card lenience: Card issuers that distribute gift cards as part of their services could no longer set expiration dates any less than 5 years after issuance.

For all the consumer protections drafted into in the Credit CARD Act, no law arrives without shortcomings. While the Credit CARD Act seemed to provide much in the way of balancing the power between issuer and borrower, it also contained a selection of gaps, gotchas, and clauses that favored the credit card companies.

The cons:

  • Interest rate increases: Interest rate increases would still be allowed in the first year, provided a promotional rate is expiring or a customer neglects his or her payments over the course of 60 days.
  • Short notices: Certain terms of the agreement could be still be altered without much in the way of fair warning. Account closures and credit line reductions could still occur in the blink of an eye.
  • Uncapped rate increase: While rate increases still must adhere to a 45-day advance notice, there would be no cap on what those rate increases might be. Penalty rates could still rise all the way up to 20% or even 30%.
  • Corporate exemption: Many protections would not apply to business and corporate credit cards, which are governed by a different set of rules.

The long-term benefits

Largely speaking, the Credit CARD Act proved to be a valuable, compassionate and civically-minded moment in our nation’s history. Cardholders are making more frequent, more timely and larger payments. From state to state, average credit card debt saw an immediate decrease, followed by a steady increase at healthier, more sustainable rates.

Young people, in particular, benefitted almost immediately. One provision of the Credit CARD Act required card issuers to cease all marketing toward college students unless they themselves opt-in. For years, the big companies had wooed students into at-times inadvisable credit card applications, luring them with t-shirts, free pizza and nearly anything you could imagine appealing to the 21-and-under crowd. While student debt writ large still presents problems of its own, the ensuing years have seen students exhibit a stronger knowledge of the credit industry while acquiring fewer cards in the process.

The issues the industry hasn’t addressed

Many consumers find themselves in a safer place financially as a result of the Credit CARD Act. As recently as 2016, experts have reported an additional ~$16 billion back in Americans’ pockets due to fee avoidance alone. Other consumers, however, have voiced their displeasure with the certain aspects of the Credit CARD Act. To follow federal regulations, credit card issuers were forced to apply a stronger rubric for high-risk applicants. In turn, many of these would-be applicants have turned to riskier alternatives, namely payday loans.

Additionally, the Credit CARD Act alone couldn’t put a stop to every less-than-stellar practice committed by the card issuers. Reports of exorbitant and fees and sky-high interest rates (upwards of as much as 50%) still flare up every year, thanks to the loopholes and omissions associated with the legislation. Unfortunately, companies (like people) can be self-interested. If you think your rights are being violated, report your case to the Consumer Financial Protection Bureau.

The future of the Credit CARD Act

For both consumers and card issuers, plenty has already played its course. We’ve seen the implications of the Credit CARD Act firsthand, yielding both a more informed customer base and a more responsible group of card issuers.

Still, economists and politicians alike have debated the merits of certain portions of the Credit CARD Act, namely the reduction in available credit for college students. The more difficult it is to obtain a credit card, the more difficult it is to start building credit. And the more difficult it is to start building credit, the more difficult it is to start contributing to the economy.

Economic theory aside, regulating bodies have hinted that there’s still more work to be done. Comparing credit cards can at times feel like anything but apples to apples, and adopting a plain set of terms could work wonders for consumer education. As the industry moves forward, many will set their sights on making both the card payment and card selection processes that much more transparent.