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A year after sweeping credit card reforms took effect, credit card holders are better off -- but confusion still lingers about the terms of card deals, according to data recently released by a new consumer financial watchdog agency.

Feb. 22 marked one year since the debut of the most significant consumer protections of the Credit CARD Act of 2009. That law rewrote the book on how consumer credit cards are marketed, billed and regulated in the United States.

Gone are surprise interest-rate hikes on existing card balances, shifting due dates for monthly payments and sky-high fees for minor infractions.

The law is working, says the Consumer Financial Protection Bureau. In one of its first major events, the federal watchdog agency issued the results of the first government analysis of the CARD Act's impact during a conference in Washington, D.C.

"One year after the CARD Act took effect, we think it is appropriate to ask whether it has had its intended effects and how the credit card marketplace has changed," Elizabeth Warren, the bureau's acting director, said in her opening speech to card industry leaders, academics, regulators and consumer advocates.

The conference -- called "The CARD Act: One Year Later" -- focused on what has changed since the law took effect, what those changes mean for consumers, credit card issuers and the market, and what still needs to be done to improve consumers' ability to compare credit card products and fully understand their terms.

Industry survey

In preparation for the conference, the bureau conducted voluntary surveys of the nine largest credit card issuers, representing 90% of the credit cards issued in the United States. The Office of the Comptroller of the Currency also conducted surveys of credit card pricing practices and the bureau polled consumers about their experiences since the new regulations took effect. Among the findings released in the fact sheet:

  • Surprise interest rate hikes on existing credit card balances have been significantly curtailed.
  • Late fees have been substantially reduced.
  • Over-limit fees, once common in the industry, have virtually disappeared.
  • Consumers say their credit card costs are clearer but terms are still confusing.

According to the OCC's survey, 15% of credit card accounts saw interest rate hikes (known in the industry as repricing) over the course of a year prior to the CARD law. Today, only 2% are repriced. The CARD Act allows banks and credit unions to increase interest rates on future purchases only if they give 45 days' advance notice of the hike. Rates can be increased on existing account balances if cardholders are more than 60 days late making payments or if the account has a variable interest rate.

The consumer survey found that of the cardholders who were at least somewhat familiar with the CARD Act, a majority (57%) said they felt the changes had benefited them personally. However, only 32% of the respondents who carried balances on their cards from month to month knew how much interest they paid on their primary credit cards last year. The survey was conducted Feb. 3-8 and was based on random-digit-dialing telephone polls with 800 adults who had at least one general-purpose credit card.

In her speech, Warren cited some of the many problems that led to passage of the credit card law: "Some issuers advertised an understated price upfront, counting on interest rate repricing, fees, penalties, and other often unexpected charges to let them impose a much higher total cost for the card than implied by the price advertised. The result was a total cost of credit far more expensive than many consumers had anticipated."

She added: "The CARD Act was designed to reduce surprises in repricing of accounts and to take a major step in improving the overall transparency of credit card costs. As a result of the CARD Act, consumers now have better information about how much they are paying for credit and how much they might save on interest if they pay down their balances more quickly than they might otherwise have planned."