Washington, D.C. — The White House today released a document titled “Guide for States: Cracking Down on Junk Fees to Lower Costs for Consumers.” It states that “junk fees” are “often not disclosed upfront and only revealed after a consumer has decided to buy something,” and implies that credit card late fees fall into that category, which is a deeply flawed mischaracterization. The document goes on to hail efforts by the Federal Communications Commission and the Department of Transportation to promote more transparency in billing by internet providers and airlines. What this document fails to recognize is one of the signature achievements of the Obama-Biden Administration, the Credit Card Accountability Responsibility and Disclosure Act of 2009, or CARD Act. The CARD Act established enhanced disclosure requirements for credit card terms and conditions and limited how much credit card companies can charge for penalties such as over-the-limit fees and late fees, as well as limits on interest rate increases. In the years since its passage, the CFPB has regularly touted the success of the Act, and its rules.
“Banks are subject to a Congressionally mandated disclosure framework that requires detailed, upfront cost and fee disclosures for virtually all consumer financial products and services. This framework has been administered and further refined by the Bureau through multiple regulations, which, in many cases, include model disclosures designed and extensively consumer-tested by the CFPB. Nothing in today’s announcement takes issue with the law or regulations under which banks operate; it simply refuses to acknowledge their existence,” said Greg Baer, President and CEO, Bank Policy Institute.
What they have said: For context, it is helpful to recall how policymakers claimed success in passing the CARD Act.
The Credit Card Accountability Responsibility and Disclosure Act “put a stop to deceptive credit card practices and hold credit card companies accountable to their customers. … As of today, consumers will be protected against unreasonable fees and penalties for late payments, as well as unfair practices involving gift cards. This law will also make the terms of credit cards more understandable and puts a stop to hidden over-the-limit fees and other practices designed to trap consumers.” President Barack Obama, White House press release, 8/10/2010
“The CARD Act was designed to reduce surprises in re-pricing of accounts and to take a major step in improving the overall transparency of credit card costs. As a result of the CARD Act, consumers now have better information about how much they are paying for credit and how much they might save on interest if they pay down their balances more quickly than they might otherwise have planned.” Sen. Elizabeth Warren (D-MA), CFPB prepared remarks, 2/22/2011
“The CARD Act’s reforms will level the playing field for consumers and usher in a new era of fairness and transparency in the market.” Rep. Carolyn Maloney (D-NY), press release, 2/22/2010
“[The CARD Act] has made things simpler and easier for consumers and it continues to save them billions of dollars that had been draining out of their pockets. At the same time, it has not restricted credit, which is available today on better terms that people are finding more dependable and satisfactory. This legislation shows that fair rules for the marketplace are good for consumers and for responsible businesses as well.” Fmr. CFPB Director Richard Cordray, Rep. Carolyn Maloney (D-NY), press release, 5/21/2019
About Bank Policy Institute.
The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.