10/08/2009 - Chairman Frank, Ranking Member Bachus and Members of the Committee:
Thank you for the opportunity to offer comments on H.R. 3639, the Expedited CARD Reform for Consumers Act of 2009. My name is Nick Bourke and I am the manager of the Safe Credit Cards Project at The Pew Charitable Trusts.
Pew is a non-profit, non-partisan research and advocacy organization. My project is part of the Pew Health Group, and one of our key goals is promoting fact-based solutions to important public policy challenges, such as the safety and transparency of consumer financial products.
I have been with Pew working on consumer credit card issues for nearly two and a half years. Before joining Pew I served as a product manager, marketing specialist, strategy consultant and legal advisor serving financial and high tech companies, including in the electronic payments space.
The Pew Safe Credit Cards Project began in early 2007 with a mandate to research perceived dangers associated with consumer credit cards and pursue strategies for making cards safer. Originally, we focused on developing a voluntary, market-based certification program based on a set of safety standards that Pew would establish. Led by a former credit card company CEO, we engaged consumer groups and credit card businesses alike over the course of many months. Our Safe Credit Card Standards are one of the products of that effort.
Over time, we shifted our focus to policy-based reforms, including the Credit CARD Act. Though I am proud to say that we established relationships with many in the industry who were receptive to our work, what we ultimately heard is that the industry would not change significantly unless the government stepped in to establish a level playing field that would foster fair competition based on transparent pricing – which has led us to where we are today.
What We Studied
Last year, the Federal Reserve determined that certain credit card practices were “unfair or deceptive,” and in some cases “harmful.” The Pew Charitable Trusts conducted research to identify how widespread these practices are in the market, and to analyze the impact to American consumers. In December of last year, and again in July of this year, we analyzed the application disclosures for all consumer credit cards offered online by the largest 12 credit card issuers – a group that controls more than 90 percent of all credit card debt in America. Our July sample included nearly 400 credit cards.
One finding from our research is that between December 2008 and July 2009, before any part of the Credit CARD Act had taken effect, the top 12 banks raised advertised interest rates significantly. In July, median advertised annual percentage rates (APRs) for purchases were between 12.24 and 17.99 percent – or 13 to 20 percent higher compared to last December. (Banks typically advertise a range of rates, with the lowest advertised rates reserved for cardholders with better credit profiles)
Read Nick Bourke's complete testimony (PDF) which presents additional research from the Pew Safe Credit Cards Project.
Pew is no longer active in this line of work, but for more information visit the Safe Credit Cards Project on PewHealth.org.