Borrowing costs for US consumers’ has declined since the implementation of credit card reform three years ago, according to a new report.
Carried out using an unique panel data set covering over 150 million credit card accounts, the research found that regulatory limits on credit card fees reduced overall borrowing costs to consumers by an annualised 2.8% of average daily balances, with a decline of more than 10% for consumers with the lowest FICO scores.
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The study is co-authored by Sumit Agarwal of the National University of Singapore, Neale Mahoney of the University of Chicago’s Booth School of Business, Souphala Chomsisengphet of the Office of the Comptroller of the Currency and Johannes Stroebel of New York University’s Stern School of Business.
The Credit Card Accountability Responsibility and Disclosure Act of 2009, or Credit CARD Act, limited the ability of card issuers to raise rates, impose fees and allocate payments.
The act also prohibited "universal default," the practise of raising interest rates on customers if they are paying late an unrelated bill, such as a car loan or a utility bill.
Researchers said they found no evidence of "an offsetting increase in interest charges or a reduction in access to credit."
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By GlobalDataAccording to the report, the CARD Act fee reductions have saved US consumers $20.8bn per year.
