The Credit Card Act and Consumer Debt Structure

32 Pages Posted: 12 Aug 2020

See all articles by Yiwei Dou

Yiwei Dou

New York University (NYU) - Department of Accounting

Julapa Jagtiani

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Quinn Maingi

New York University (NYU) - New York University

Joshua Ronen

New York University (NYU) - Department of Accounting

Date Written: August, 2020

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

JEL Classification: G21, G28, G18, L21

Suggested Citation

Dou, Yiwei and Jagtiani, Julapa A. and Maingi, Quinn and Ronen, Joshua, The Credit Card Act and Consumer Debt Structure (August, 2020). FRB of Philadelphia Working Paper No. 20-32, Available at SSRN: https://ssrn.com/abstract=3671835 or http://dx.doi.org/10.21799/frbp.wp.2020.32

Yiwei Dou (Contact Author)

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street
Suite 10-180
New York, NY 10012
United States

Julapa A. Jagtiani

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Quinn Maingi

New York University (NYU) - New York University

Joshua Ronen

New York University (NYU) - Department of Accounting ( email )

40 West 4th Street, Suite 400
Suite 10-180
New York, NY 10012-1118
United States
212-998-4144 (Phone)
212-995-4599 (Fax)

HOME PAGE: http://www.stern.nyu.edu/~jronen/

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