Many consumers still are not familiar with the Credit Card Accountability, Responsibility and Disclosure Act and believe it has not had any effect on them, new research suggests.
The lack of consumer awareness to the Credit CARD Act represents good news for banks, according to Auriemma. “Cardholders appear relatively unaffected, despite the changes in the credit card landscape resulting from the act and initiatives taken by banks to offset lost revenue,” the company noted in the Cardbeat survey report.
New York-based Auriemma Consulting Group conducted the research through an online survey of 420 U.S. consumers in January.
Congress passed the Credit CARD Act, which President Obama signed into law in May 2009, to create fair and transparent practices related to the extension of credit under an open-ended consumer credit plan. Most of the law took effect in January last year.
Under the law, card companies cannot impose any excessive fees and have to give cardholders 45 days notice of any interest rate increases. Cardholders also may set their own credit card limits.
About 27% of survey participants said they were familiar with the Credit CARD Act, while 73% were unfamiliar with the law. About 68% said that the law had no impact on them (see chart).
Patricia Sahm, Auriemma managing director, tells PaymentsSource the survey results did not surprise her. “Consumers are just not having conversations with other consumers or their banks about it,” she says.
Moreover, the card industry has not promoted the required changes because of the costs associated with the promotions, Sahm says. “So short of lawmakers and consumer activist groups doing promotions, there really is no champion for it,” she notes.
Banks have other issues to worry about, such as the impending cuts in debit card interchange revenue and the general regulatory environment, to take time to educate consumers, Sahm says.
The so-called Durbin amendment to the Dodd-Frank Act resulted in the Federal Reserve Board proposing a 12-cent cap on debit interchange fees (see proposal). The comment period has ended, and the Fed is scheduled to publish its final rule in April.
Many consumers also are not aware of the Credit CARD Act because the resulting changes in their credit card statements are small, says Auriemma associate Scott Strumello.
Moreover, the law may have required issuers to apply customer payments toward the highest interest balances first, but if consumers are carrying a balance on a month-to-month basis the change in their payment may be less than $1 per month, Strumello explains. In fact, only 24% of respondents noted a difference in the interest rate on their primary credit card within the previous six to 12 months, while 76% did not notice any difference, the survey found.
