The Credit CARD Act of 2009: what did banks do?
AbstractThe 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.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Boston in its series Public Policy Discussion Paper with number 13-7.
Length: 29 pages
Date of creation: 01 Oct 2013
Date of revision:
Find related papers by JEL classification:
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D18 - Microeconomics - - Household Behavior - - - Consumer Protection
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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