A year after the credit card reform law was enacted, Elizabeth Warren, the administration's official in charge with setting up the Consumer Financial Protection Bureau (CFPB), said the industry has improved its practices and warned against over regulation of the card market.

Warren is scheduled to host a conference on Tuesday marking the one-year anniversary of the CARD Act. According to text of her remarks, Warren said the reform legislation was helpful and plans to release a study showing improvements in practices during the last year.

"I believe the CARD Act has pushed in the right direction. It has brought about significant reforms in both the pricing practices of card issuers and the information provided to consumers," Warren said, according to her remarks. "Even so, substantial challenges remain. Thinking about the approach to regulation, and how to improve markets without an overreliance on rules, will be the next challenge."

The CARD Act, which was enacted in May 2009, largely stops credit card issuers' ability to increase rates on existing balances. It also clamped down on fees by requiring card companies to get customers' permission before charging them over-the-limit charges, among other restrictions.

The CFPB announced the results of a survey of the nine largest card issuers, which represent 90% of the card market. The Office of Comptroller of the Currency (OCC) also conducted a survey of price practices of card issuers.

The studies found that price hiking of interest rates on existing accounts has dramatically declined; the amount of late fees have substantially decreased; overlimit fees have virtually disappeared; and consumer reports are clearer but still confusing.

"A year later, the CARD Act has brought about major changes in the way the industry operates. In part, this is attributable to the protections Congress enacted," Warren said. "But the data we have assembled indicate that much of the industry has gone further than the law requires in curbing re]pricing and overlimit fees. A number of issuers have eliminated some of the practices that can confuse customers and cost them money they reasonably did not expect to pay. Leaders in the industry deserve credit for moving in the right direction."

In its study, the OCC found the amount of late fees paid by consumers has dropped by more than half, from $901 million in January 2010 to $427 million in November. But the CFPB found that six of the nine largest issuers said that they have increased their minimum payment.

The OCC also found that overlimit fees have dropped from approximately 12% per year to 1% while the CFPB found that all nine of the largest issuers still process some overlimit fee.
From her first speech to the industry, Warren has made credit card disclosures a main priority. She has called for clearer, shorter credit card contracts to enable easier comparisons for consumers. Despite her push to reform such agreements, Warren warned against over regulating the industry.

"As soon as the CARD Act became law, it seems that some industry lawyers were asked to find slightly different ways to accomplish that which the legislation was intended to outlaw," Warren said. "To its credit, the Federal Reserve Board responded with a rulemaking proceeding designed to close the loopholes. While I doubt that anyone thinks this is the last time such a rulemaking proceeding will be required, we can probably agree that this approach – write a rule, avoid a rule, write another rule – is costly for consumers and for the industry. Because it multiplies the number and complexity of rules, this approach creates special challenges for those smaller banks and credit issuers that still offer credit cards to their customers."

Tuesday's conference will include industry, academics and consumer advocates on the state of the card industry a year after the CARD Act and any changes needed.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.