It's been less than three months since the CARD Act changed credit card statements, and there's already evidence that it's working.
From health care reform to financial regulatory reform, there have been so many recent legislative initiatives that it’s easy to forget slightly older pro-consumer changes to our nation’s laws.
A prime example is the Credit Card Accountability, Responsibility and Disclosure Act. While it was signed into law last year, some provisions just went into effect this February; including one that changes the format of credit card statements to make them more consumer-friendly. Watch the story below for a quick reminder of the changes, then meet me on the other side for an update on how it’s doing.
So the law now requires that card companies provide an estimate of how long it will take to pay off a credit card balance by making minimum payments. It also requires issuers to provide a toll-free number for those needing help.
There’s already evidence that both these provisions are having an effect.
Last month the National Foundation for Credit Counseling (NFCC) asked 2,000 consumers if these two provisions were changing their behavior. Twenty-five percent of respondents said that after seeing how long it would take to pay off their bills with minimum payments they were inspired to pay more. And twelve percent said that having the toll-free number of a free credit counseling service prompted them to call and seek help.
Here’s the question that was asked, along with the complete answers.
Credit card statements now provide a snapshot of how long it would take me to get out of debt if I only paid the minimum amount due each month. This information…
A. Has inspired me to pay more each month = 25%
B. Makes no difference because I’m already paying as much as I can each month = 55%
C. Makes no difference because I already pay my balance in full each month = 7%
D. Made me call the credit counseling agency number listed on my statement = 12%
This survey isn’t conclusive proof that the CARD Act is helping consumers: it’s possible, even likely, that we’ve entered a new age of frugality (here’s a post I wrote about that.) But it certainly seems the new law is already helping people pay down their debt faster and seek help when they need it.
Too bad it took this long to do something so simple that could help so many. It shouldn’t have. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 originally featured a similar provision to alert consumers to the danger of making minimum payments. But the banking lobby successfully had it removed prior to enactment.