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New credit card rules not hurting borrowers: study

CHICAGO (Reuters) - A private lending watchdog group said on Wednesday that sweeping rule changes imposed on credit card issuers last year by the U.S. Congress had increased transparency for borrowers without restricting the availability of credit.

When the law, known as the Credit Card Accountability, Responsibility and Disclosure Act of 2009, went into full effect last February, financial companies warned it would make it harder for consumers to get credit cards and more expensive for those who did.

But a study by the Center for Responsible Lending of card company activity following the law's implementation found that credit providers had not raised the real interest rates they charge consumers in the wake of the new rules or cut back on their willingness to extend credit.

Direct-mail credit card offers to consumers -- a key industry marketing technique -- continue to be extended at a volume and pace consistent with economic conditions, suggesting, said that the contraction in credit availability the industry warned would follow has not materialized, the study said..

Looking at five different sets of numbers, including the Federal Reserve Board and official lender filings with regulators, the Center found that only one thing had changed over the past year: The interest rates that card companies tout in their solicitations have gone up.

But the actual rates consumers pay have not gone up. The Center said the narrowing between so-called "stated rates" and real rates meant card companies were being more transparent about the cost of the credit they are providing consumers.

It also estimated that as much as $12.1 billion in previously hidden annual charges were now being clearly disclosed in credit card offers.

In the long term, the group said, the greater price transparency will also lower credit costs "by spurring competition and making it harder for issuers to manipulate or arbitrarily raise prices."

The Credit CARD Act of 2009 contained a host of new rules, including a requirement that card companies notify consumers 45 days before they make any big changes to the terms of their cards, including rate increases or penalty fee changes.

It also required credit card companies to disclose how long it will take consumers to pay off their balances if they only make the minimum payment each month.

It banned most rate increases during the first 12 months after a card is issued to a consumer, confined any increases to new purchases and required the card companies to apply any payments above the minimum to balances carrying the highest interest rate.

(Reporting by James B. Kelleher, Editing by Greg McCune)