The Credit CARD Act of 2009: What Did Banks Do?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Credit CARD Act of 2009 was intended to prevent practices in the credit card industry that lawmakers viewed as deceptive and abusive. Among other changes, the Act restricted issuers' account closure policies, eliminated certain fees, and made it more difficult for issuers to change terms on credit card plans. Critics of the Act argued that because of the long lag between approval and implementation of the law, issuing banks would be able to take preemptive actions that might disadvantage cardholders before the law could take effect. Using credit bureau data as well as individual data from a survey of U.S. consumers, we test whether banks closed consumers' credit card accounts or otherwise restricted access to credit just before the enactment of the CARD Act. Because the period prior to the enactment of the CARD Act coincided with the financial crisis and recession, causality in this case is particularly difficult to establish. We find evidence that a higher fraction of credit card accounts were closed following the Federal Reserve Board's adoption of its credit card rules. However, we do not find evidence that banks closed credit card accounts or deteriorated terms of credit card plans at a higher rate between the time when the CARD Act was signed and when its provisions became law. Terms of use: Documents in

Credit Use of U.S. Households after the Great Recession: The Role of Credit Constraint

“…Recent legislation including the Credit Card Accountability Responsibility and Disclosure Act of 2009 has affected the way households use credit cards and also it has changed the credit card market as a whole (Canner & Elliehausen, 2013;Jambulapati & Stavins, 2013;O'Neill & Xiao, 2014). Recent legislation including the Credit Card Accountability Responsibility and Disclosure Act of 2009 has affected the way households use credit cards and also it has changed the credit card market as a whole (Canner & Elliehausen, 2013;Jambulapati & Stavins, 2013;O'Neill & Xiao, 2014).…”

The Credit Card Act and Consumer Finance Company Lending

“…The recession actually began during the prelaw period and continued into the implementation period (December 2007 through June 2009). As suggested by Jambulapati and Stavins (2014), lenders were unlikely to wait until the effective date to make changes, especially when the changes involved re-pricing or reducing exposure to risk on risky accounts during a recessionary period. Bank card holding did not recover to prelaw levels in the effective period despite the recovery from the recession that began in the third quarter of 2009, five quarters before the beginning of the effective period.…”

How Important is Variability in Consumer Credit Limits?

“…Following the financial crisis of 2008, commercial banks reduced credit card limits overall by more than a quarter. During the worst two quarters, close to 20 percent of individuals lost a credit card account, including those with the best credit scores (see also the estimates in Jambulapati and Stavins (2013)). My estimates suggest that, after adjusting for age and risk, credit card limits declined nearly continuously from the end of 2008 through 2013.…”

“…The CFM asks a much richer set of questions about credit history and individual characteristics but is small and is not a panel. Jambulapati and Stavins (2013) examine both of these datasets to study whether the passage of legislation regulating the credit card industry affected the availability of consumer credit. gains and losses of accounts reflect the stable saturation of the credit card market.…”