ABA Finds Limited Credit Availability, Higher Credit Costs Since CARD Act

Surface benefits for consumers from the 2009 Credit CARD Act have been offset by significant negative effects, ABA told the Consumer Financial Protection Bureau yesterday. The law has limited credit availability for subprime borrowers and those with shorter credit histories, such as young people and immigrants. Meanwhile, for those who can obtain credit, average credit lines are lower and credit costs are higher.

From 2008 to 2014, ABA found, super-prime accounts rose by 6 percent, while prime accounts fell by 16 percent and subprime accounts plummeted by 35 percent. The size of credit lines for all accounts have declined over that same period, falling 13 percent for super-prime borrowers, 29 percent for prime borrowers and 24 percent for subprime. The share of credit cards with an annual fee rose by 2 points, and the average annual fee jumped by 17 percent.

Rewards cards are growing in popularity across all risk categories, ABA found, making up 73.3 percent of total accounts. The number of rewards card accounts grew 8 percent since 2010 and non-rewards cards shrunk 46 percent.

Since the CARD Act passed, credit card agreements and terms were simplified and made more readable, but ABA said it does not envision further simplification due to prescriptive legal requirements. Card issuers are also testing language that makes clearer what a “grace period” means, ABA said. ABA’s letter came in response to the CFPB’s biennial review of how the credit card market and consumer protections are functioning after the CARD Act. For more information, contact ABA’s Nessa Feddis.