The Consumer Financial Protection Bureau has issued a report on how the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) has affected the consumer credit card market. The report describes the CFPB’s findings based on the first of the biennial market reviews that the CFPB must perform under the CARD Act. Most notably, the report also describes the CFPB’s plans to scrutinize add-on products, rewards programs, and other “areas of concern.”

The CFPB’s findings include:

  • The CARD Act has effectively eliminated overlimit fees, sharply curtailed repricing practices, and reduced the average size of late fees. The total cost of credit (all fees, interest, and finance charges) declined by two percentage points between 2008 and 2012 despite an increase in annual fees and interest rates. However, the CFPB was unable to determine the extent to which this decline was attributable to the CARD Act, rather than other factors such as the fall in delinquencies from their 2008 highs.
  • The CARD Act has noticeably affected credit availability in three ways: substantially decreasing the number of credit card accounts originated among students and other consumers under the age of 21; causing a small but discernable percentage of otherwise creditworthy applicants to be declined due to insufficient income to satisfy the Act’s ability-to-pay requirement; and reducing the percentage of consumers receiving unsolicited credit line increases.
  • Credit cards also are generally less available now than in 2007. This is particularly true in the subprime and deep subprime sectors, which each saw declines exceeding 60 percent in used credit lines from the second quarter of 2008 to the fourth quarter of 2012. The CFPB emphasizes, however, that “nothing in the evidence reviewed suggested that the CARD Act was responsible for the reduction in credit access” or “that the CARD Act has retarded the pace of recovery.” The CFPB points to $1.9 trillion in total unused credit for cardholders (which includes $38.6 billion of subprime credit) as evidence that “responsible access to credit remains available.”
  • The readability and accessibility of cardholder agreements has generally improved since 2008.

The report highlights the following “areas of concern” that “may pose risk to consumers and that will warrant further scrutiny by the Bureau”:

  • Marketing and sales practices of card issuers and their service providers relating to add-on products, such as debt protection, identity theft protection, and credit score monitoring.
  • “Fee harvesting” in the form of application and other fees charged before account opening. Although such fees are not counted toward the CARD Act’s limit on first-year fees (which cannot exceed 25 percent of the consumer’s credit limit), the CFPB nevertheless intends to monitor such fees “to determine if it should take action” under its UDAAP authority.
  • Deferred interest products, with the CFPB finding it is “unclear whether [vulnerable] consumers appreciate the high interest rate risk that might occur at the end of the promotional period.”
  • Rewards program disclosures and practices. The CFPB questioned whether specific actions required to earn rewards and formulas for computing rewards are adequately disclosed and raised concerns about the complexity of program terms involving the value of reward points and redemption and forfeiture rules. The CFPB also identified disclosure concerns involving how required disclosures can be translated into an online payment screen, as well as the adequacy of grace period disclosures.

Ballard Spahr attorneys are available to advise credit card issuers on compliance with applicable consumer financial services laws. Our Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or, CFS Practice Leader Jeremy T. Rosenblum at 215.864.8505 or, John L. Culhane, Jr., at 215.864.8535 or, or Glen P. Trudel at 302.252.4464 or

Copyright © 2013 by Ballard Spahr LLP.
(No claim to original U.S. government material.)

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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.


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