Credit card industry under scrutiny in US and UK

23 February 2010 09:09:48

Credit card markets assessed on both sides of the Atlantic.

Regulation of the credit card market has been under the spotlight in the UK in recent months, with the Department for Business, Innovation and Skills set to release the results of a government consultation on credit and store cards in April. Over in the US, however, reform is further down the line, with the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 set to be brought into effect from February 22nd 2010. According to the UK Cards Association, British legislators have been following proceedings in the US "avidly", suggesting the Act may ultimately have consequences for UK as well as US consumers and industry players.

What does the CARD Act of 2009 entail?

The CARD Act was signed into law last May as part of an effort to afford consumers greater security from the exploitative practices of credit card companies. Five key areas where legislation could provide consumers with more protection were identified by the House Financial Services Committee and the Senate Banking Committee. The CARD Act addresses these areas by banning unfair rate increases; cracking down on fee traps by ensuring consumers have sufficient time to pay their bills; demanding that particulars of products are laid out in plain language and in plain sight; and restricting credit card marketing to students and other young adults.

What is the likely impact on US consumers?

A consumer awareness survey conducted for the Consumer Federation of America and the Credit Union National Association found that 61% of those surveyed know that new protections are on the horizon, but 65% don't know that they take effect this month. Nevertheless, a report by CreditCards.com suggested the act is already making an impression. According to a national survey conducted by the organisation, 48% of credit cardholders have experienced a unilateral change by their credit card issuer in the past 12 months. The most common: a rate increase, leading experts to warn that, even with the greater protection afforded by the Act, consumers will need to pay special attention to the terms and conditions section on their statements after February 22nd. In an effort to further aid the cause of consumers, CreditCards.com is hosting a live event at the White House featuring American economist Austan Goolsbee. Mr Goolsbee, who advises president Barack Obama on economic policy, will answer questions on credit card reform and what it means for individuals. The event will be streamed live from 14:00 EST on Monday, February 22nd, and questions can be submitted through Facebook or Twitter.

How does this affect the UK?

The UK Cards Association has pointed out that legislators have been keen to assess areas of the US Act that could be relevant to the UK. That said, the UK credit card industry's representative body believes there are marked differences between the US and UK credit card markets. As such, the association has warned of "crying wolf" without the full impact of the legislation being assessed. Instead, it suggests an alternative package for change that includes plans to reduce the cost of paying off credit card debt and provide more information on minimum payments. "Some of the features addressed in the CARD Act are not features of the UK market, such as universal default," UK Cards Association head of policy Paul Rodford commented. "The prudent thing to do is not to rush and cherry-pick superficially attractive provisions, but to wait and see what happens next." In the meantime, UK consumers should continue to check the fine print of their credit card contracts thoroughly to ensure they understand fully the terms that surround this type of borrowing.

‹ Back

All news articles

All Credit cards News
All News Stories

Product Offers
Please ensure that you fully read the terms & conditions of any product or policy before you decide to proceed and are fully aware of the total costs and the benefits and any exclusions or limitations applicable to the product or plan.

Please note that the product links will take you direct to the Issuer or Insurer's site direct and we cannot be held responsible for the information which they provide within their own sites. On some comparison tables we use a star rating which rates products by visitor popularity.