The Credit Card Accountability Responsibility and Disclosure Act of 2009 or Credit CARD Act of 2009 was passed by the United States Congress and signed into law in May of 2009. The CARD Act represents comprehensive credit card reform legislation in order to establish fair and transparent
ractices relating to the extension of credit under an open ended consumer credit plan. As a piece of pro-consumer legislation, the CARD Act introduced new rules for banks designed to prevent or reduce unfair credit practices as the law requires credit card issuers to give 45 days' notice before changing terms, and caps fees at 25% of the card's initial credit limit. Three years after the act was passed, both mortgage and savings account interest rates have fallen, but the average credit card rate remains high and it appears that the banks are using higher interest rates on credit cards to make up for some of the fees they lost with the passage of the CARD Act.Looking at current credit card rates, the average rate is up from the 11.64% it was when the CARD Act went into effect and the rates are now hovering around 14.34% in annual interest. Comparing the federal funds rate of just 0.25% that financiers loan money to each other on and the prime rate of 3.25% which most consumer loans are based on, it appears the banks are enjoying some wide margins on the consumer lending business with the high credit card interest rates. It also looks like business is very good for the banks right now as consumers continue to spend and have added more debt in four of the past five quarters while the overall business from consumer credit cards grew to more than $4 billion in August alone, up 5.9% year over year.
The growing credit card debt balances combined with high interest rates have the big banks expecting to make big profits and although the general economic conditions in the U.S. are currently volatile, many analysts still see more economic gains in the year ahead. However, it does take a bit of extra confidence to feel good about an economy where unemployment remains at 7.8% and growth in U.S. gross domestic product was only at 1.3% in the second quarter, well below the 1.7% many economists had expected. Despite those factors, economists are saying that rising stock prices and a slightly improved residential real estate market seem to have stimulated consumer spending demand.
Some economists warn the pattern of higher credit card spending and the resulting higher debt loads actually gives consumers little reason for improved economic confidence and they advise carrying less credit card debt whenever possible. Some less-than-happy consumers have also pointed out that after the government bailed out the banks, the banks are now making record profits thanks to the tax dollars they received. The banks have shown they have little mercy for the average credit card holder with the high interest rates they continue to charge, and the overall situation provides a snapshot of an America that is still incurably addicted to debt.