On Tuesday, The Pew Health Group published the latest research from its Safe Credit Cards Project. It examined the impact of credit card regulation (in the form of the Credit CARD Act of 2009) on consumers, and the conclusion reached by the project’s director, Nick Bourke, was summed up in a press release:

“Pew’s research shows that predictions that the legislation would spark new charges and long-term interest rate growth have not materialized. Whatever increases in advertised interest rates we saw going into 2010 have not continued into 2011. The Act created a new equilibrium where interest rates have flattened, penalty charges have declined and a number of practices deemed “unfair or deceptive” have disappeared. Consumers are enjoying safer, more transparently priced credit cards – and banks and credit unions are able to compete on a more level playing field.”

Credit card regulation can be helpful

That’s quite an endorsement of the new law, and it seems to be backed up by at least two of the report’s findings for credit cards issued by banks (as opposed to credit unions):

1. Credit card rates now stable–At the start of 2011, advertised credit card rates for purchases remained in the 12.99 percent to 20.99 percent range, just as they’d been in 2010.
2. Lower penalty charges –Only 11 percent of credit cards now charge overlimit penalty fees, while late fees have dropped from a median $39 each before the act was implemented to a capped $25 this year. However, the new law allows credit card companies to charge consumers $35 for subsequent tardiness if they’re late more than once within any six-month period.

Credit card companies still have a point

When the Credit CARD Act was still being written, credit card companies spent millions on lobbyists who argued vociferously that any interference in their marketplace would likely have unintended consequences that could harm consumers’ interests. Although the Pew data (along with numerous other reports from consumer advocates) suggest that the most dire of those lobbyists’ predictions proved unfounded, they haven’t all turned out to be wrong.

Pew itself acknowledges that the number of bank credit cards that charge annual fees shot up from 14 percent to 21 percent between 2010 and 2011. And uncharitable folk could accuse it of somewhat skating over what happened to advertised credit card rates. It’s true that on average they didn’t change during that one year. However, they did tend to rise in 2009. That was in the run-up to the act’s implementation, when the banks were desperately rejigging their business models to accommodate the new rules.

Credit card regulation’s winners and losers

When this credit card news blog last took a detailed look at regulation (Media split on CARD Act reform) at the end of February, it quoted a report from USA Today that suggested that new annual fees and higher credit card rates were generally targeted at those with lower credit scores; in other words, those who are least able to afford them.

So not everyone necessarily benefits from credit card regulation, and sometimes it’s those whom consumer advocates most wish to protect who suffer most. However, perhaps the final word should go to Peter Garuccio of the American Bankers Association. The February blog quoted him as telling USA Today, “when you look at the regulations, it’s a net positive for consumers. But there have been some trade-offs.”

Published 05/13/11 (Modified 07/09/14)