It's been a little more than a year since the CARD Act became law and contrary to what the banking lobbyists claim, Elizabeth Warren says it's working.
Asked to respond to a claim, made by the chief attorney for the American Bankers Association, that the act has made credit more expensive and harder to access, Warren shot back: "The data doesn't support that," she said, suggesting it's hard to determine whether any decline in consumer credit is due to the CARD Act rather than less demand for credit from debt-laden consumers or banks' unwillingness to lend as freely as during the go-go days of the early 2000s.
In terms of the Act's measurable impact, an Office of Comptroller of the Currency study found that since the law took effect:
- -- Only 2% of credit cards accounts were subject to rate hikes, down from 15% of accounts prior to the new laws.
- -- The total amount of late fees collected dropped by more than half from $901 million in January 2010 to $427 million in November 2010.
- -- Over-the-limit fees "virtually disappeared," dropping from 12% of credit card accounts to 1%.
Tech Ticker recently caught up with Warren in Washington, D.C. where she
is tasked with setting up the Consumer Financial Protection Bureau (CFPB).
Like the CARD Act, the goal of the CFPB is more transparency, specifically in the realm of credit cards and mortgages. "It's about making the costs clear. It's about making the risks clear. It's about making it easy to compare one product to two or three others," she says.
To this end, Warren's goal is to eliminate all the fine print in credit card agreements and make mortgages less complicated. "You've got to make the costs clear upfront and then we'll see what the competitive market will do with it," she says.
Essentially, she wants to provide consumers with the simple answers to these two fundamental credit questions:
1. Can I really afford it?
2. Is that the cheapest rate available to me?
Warren believes transparency and free market practices will work in favor of the consumer to eliminate all the tricks used by the financial services industry to lure customers into agreements they don't understand.
As part of her goal, the CFPB has created a Web site, consumerfinance.gov, that allows consumers to get help, voice complaints, find financial educational tools and shows how the organization is working for you. It's also interactive, and Warren encourages public participation.