The Credit Card Act and Consumer Debt Structure

Yiwei Dou, Julapa Jagtiani, Ramain Quinn Maingi and Joshua Ronen

No 20-32, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: We investigate whether the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 influenced the debt structure of consumers. By debt structure, we mean the proportion of total available credit from credit cards for each consumer.The act enhances disclosures of contractual and related information and restricts card issuers’ ability to raise interest rates or charge late or over-limit fees, primarily affecting non-prime borrowers. Using the credit history via the Federal Reserve Bank of New York/Equifax Consumer Credit Panel during 2006–2016, we find that the average ratio of credit limit on cards to total consumer debt declined for non-prime borrowers in comparison to prime borrowers after the introduction of the CARD Act. The decline did not occur before the bill was first introduced in Congress; it took place afterward and continued through the end of our sample period. The results suggest that the CARD Act likely had an adverse effect on non-prime borrowers.

Keywords: CARD Act; credit cards; credit limits; consumer debts (search for similar items in EconPapers)
JEL-codes: G18 G21 G28 L21 (search for similar items in EconPapers)
Pages: 32
Date: 2020-08-05
New Economics Papers: this item is included in nep-ban and nep-pay
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Journal Article: The Credit Card Act and Consumer Debt Structure (2022)
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DOI: 10.21799/frbp.wp.2020.32

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