New credit card rules save consumers $21 billion a year

A new study has found that the limits on credit card fees passed by Congress in 2009 are saving consumers $20.8 billion a year, a far bigger benefit than economists expected.

The consumer-friendly regulations in the Credit Card Accountability Responsibility and Disclosure (CARD) Act reduced fees paid by card customers, particularly among those with low credit scores.

Congressman Gary Peters, a West Bloomfield Township Democrat, helped write the bill, in particular a provision that allows consumer to pay off credit cards with the highest interest rates first rather than letting the card companies dictate which debt consumers are forced to pay.

The study, compiled by economists from the University of Chicago, New York University and the National University of Singapore, singled out the CARD Act requirement that banks disclose to customers the interest savings from paying off balances in 36 months rather than only making minimum payments.
But the law eliminated many of the most annoying fees the banks had charged.

New York Times business writer Floyd Norris explained the before and after effects of the new rules this way:
“Banks would vary the due date from one month to the next and would sometimes set a deadline in the middle of a day. A consumer could pay the bill that afternoon and still face a penalty. Want to pay by phone or Internet? Fine, but there is a fee for that. Avoid that fee by paying by mail and you risked a slow delivery that would result in a late fee.
“Did you fall behind on one of your credit cards? Then a bank could charge you a fee on another credit card, even though you never missed a payment on it. There were even “inactivity fees” if a customer did not use the card. Failure to pay such a fee could lead to additional late fees.

“The new rules, phased in during 2009 and 2010, required that banks send out bills at least 21 days before payment was due — up from the previous limit of 14. They required that the monthly due date remain constant and said that if a due date fell on a weekend, any payment received the next business day could not be assessed a late fee.

“They required that any increase in interest rates could take effect only with 45 days’ notification and would not apply to purchases made before the increase took effect. They limited how many fees could be applied — like only one late fee each month — and they set limits on how large the fees could be. There would be no more fees for paying by phone or Internet.”