Credit Card Accountability And Disclosure Act: Case Study

Credit Card Accountability Responsibility and Disclosure Act

The Credit Card Accountability, Responsibility, and Disclosure Act was signed into law by President Obama on may 22, 2009 and is suppose to protect consumers and to “bring some common sense and rationality into our financial system” (Robert Gibbs, the White House spokesman). The act forces credit card issuers to rework their market and profit strategies while it makes the life in many ways easier for consumers who already hold a credit card. The act addresses subjects such as late- fees, but is also concerned with the protection of young consumers. For instance, the act states that consumers under the age of 21 are not allowed to receive a credit card from any card issuer
In other words, credit card issuers are not allowed to send offers to potential consumers under 21 years of age, which might motivate them to enter into a credit card contract. The advantage of this rule is that young consumers wont be enticed by credit card issuers to sign a contract. A drawback however is that young consumers are not informed about different offers from credit card issuers. Young consumers will be less involved with credit card issuers unless they really need a credit card. Whether this is good or bad is in the eye of the beholder. Also, credit card issuers may not give any promotional gifts or any other tangible items to students in order to motivate them to enter into a credit card contract (Act, 1748/49). The distribution of such gifts is prohibited near campus or at any event sponsored by the institute of higher education (Act, 1748/49). In addition, Universities or Colleges are motivated to minimize the exposure of credit card marketing on campus (Act, 1748/49). In fact, card issuers have to notify the school about the location where the credit card marketing will take place (Act, 1748/49). Also, schools are encouraged to include credit card and debt education and counseling sessions into their orientation program for freshmen (Act,
Consumers can type any question into the search bar in the top right corner and will be provided with quick answers. Also, under “Participate” consumers are informed about terms and conditions of credit card contracts. In particular there is information available about costs, any behavior that would change rates or terms, and additional information such as consumer rights. At the bottom of the website consumers can find frequently asked questions concerning any topic. For more specific and complicated questions consumers can request direct help through a hotline provided by the CFPB. In addition, consumers are provided with protections against credit discrimination and can submit complaints regarding this issue. One very important mission of the CFPB is to make terms and conditions of credit card contracts more transparent to consumers, which helps the consumer not to get trapped by additional fees and increases in rates. We showed that Congress does a lot to protect the consumers of financial services provided by credit card companies but how do these new regulations affect the credit card institutes themselves? As mentioned before credit card institutions make now less profit through i.e. late and over-limit fees also because due dates and times are easier to follow for consumers. In addition, less profit will be made because