This year’s holiday shopping season has started with a bang with 247 million shoppers (an all-time high and up from 226 million last year) spending an average of $423 each at local or online stores during the Thanksgiving Black Friday weekend.[4]According to the National Retail Federation, retail sales during November and December this year are expected to total $586 billion,[5] and 28 percent of shoppers will use credit cards as their primary means of payment when purchasing gifts.[6]

Exchanging gifts, visiting with friends and relatives, and organizing festive meals are what make the season special. Unfortunately, the holiday spirit can be marred for shoppers by abusive or misleading practices by credit card companies.

While many Americans use credit cards to pay for holiday-related expenses at the end of the year, 40 percent of low- and middle-income households use credit cards to pay for critical needs such as medical expenses, mortgage payments and utilities.[7] While Americans’ average credit card debt has decreased since the Great Recession, increased joblessness combined with three decades of slow income growth continues to take a toll. The U.S. Census Bureau estimates Americans will carry a total of $870 billion in credit card debt this year.[8] Credit card company fees and lack of transparency add pressure to already-strapped family finances, especially during the holidays.

New Credit Card Rules are Making Consumers Happier

Millions of credit card holders have benefited from the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (CARD Act) combined with the regulatory and enforcement power of the Consumer Financial Protection Bureau (CFPB), which administers the law. According to a recent J.D. Power and Associates survey, consumers are happier with their credit cards as a result of the CARD Act’s provisions[9] that rein in unfair late fees and interest rate hikes. The CARD Act also protects college students and teens from unfair credit card practices and sets new standards for safeguarding the value of gift cards.

The CFPB has a variety of tools for protecting credit card holders including rulemaking, enforcement powers, and consumer complaint collection. Also, it often works jointly with other government regulators and in recent months, the CFPB has brought enforcement actions against major credit card companies for a range of abusive practices. The result: $425 million in refunds to 5 million Americans.

Since July 2011, the CFPB has collected some 23,400 complaints against credit card companies, and the J.D. Power survey suggests the complaint database is incentivizing companies to handle complaints more quickly and more often to customers’ satisfaction. CFPB director Richard Cordray recently told Congress that the bureau found “fewer credit card complaints” than it had expected due to the success of rules implemented after enactment of the Credit CARD Act of 2009.[10]

The Credit CARD Act is Safeguarding American Consumers

Among low- and middle-income families with credit card debt:

One-third said they are paying down balances faster in response to new requirements for clarity and disclosure on monthly billing statements.

Between 2008 (before the CARD Act went into effect) and 2012 (when the law was in full swing), the number of households paying late fees dropped by half to 28 percent, and 24 percent fewer households reported interest rates increasing as a result of a late payment.

New rules requiring companies to have a customer’s authorization to go over the limit on his or her credit cards mean 22 percent fewer households have been charged over-limit fees. The benefits have been most dramatic for African-American (32 percent fewer) and Latino (36 percent fewer) households.[11]

Among all Americans:

The percentage of credit card accounts experiencing rate hikes over a one-year period has fallen from 15 to two percent since the passage of the CARD Act.

From January to November 2010, total late fee payments fell from $901 million to $427 million.

Consumers paying over-the-limit fees fell from 12 percent to less than one percent.

80 percent of consumers noticed that payments are now due on the same day each month; 77 percent have read the new warning about late fees; and 70 percent have seen the new warning about the dangers of making only minimum payments. [12]

Across the industry, the gap between stated interest rates and actual rates paid has narrowed considerably, meaning that $12.1 billion in yearly charges are now more transparent to consumers.[13]

Next Steps for Credit Card Regulation

While the Credit CARD Act and CFPB have benefited millions of American families, additional protections from unjust credit card company actions are needed. The CFPB has proposed a rule to allow creditworthy, stay-at-home spouses to apply for credit and start building credit histories. Additionally, the CFPB is working on a study of mandatory arbitration clauses that prevent consumers from suing credit card companies and ban class-action suits. The study is expected to result in the regulation or prohibition of such clauses. The CFPB’s proposed rulemaking on reloadable prepaid debit cards, which are often marketed to vulnerable groups who may not qualify for credit cards, needs to address problems like deceptively high usage fees (for reloading funds or using ATMs, for example), overdraft fees, and loan-like functions.

This brief is part of the series Sensible Safeguards: The Gift That Keeps on Giving, Especially During the Holidays

This holiday season, some of the most valuable presents Americans will receive are the gifts of health, safety and economic security through our nation’s strong system of standards and safeguards. Just in time for the holidays, the Coalition for Sensible Safeguards has produced a report detailing five areas in which protections significantly help make the December and New Year festivities a safer and more joyful experience.

Read the other sections:

Auto Safety and the Holidays

Food Safety and the Holidays

Toy and Product Safety During the Holidays

Holidays and Recycling