ABA Study on Potential New Credit Card Regulations
"An Economic Assessment of Regulating Credit Card Fees and Interest Rates" 
, a new study sponsored by the American Bankers Association by economists Jonathan Orszag and Susan Manning, concludes that "placing further legislative restrictions on credit card interest rates and fees is likely to harm the vast majority of consumers, most of whom manage credit cards successfully."
The study, sponsored by the American Bankers Association, reaches three primary conclusions:
- Proposals for price controls on credit cards may help a small minority of borrowers, but only at the cost of harming the vast majority of borrowers;
- Innovation and deregulation have allowed credit card prices to reflect borrower risk more precisely, which has benefited the vast majority of borrowers; and
- Effective alternatives exist to protect consumers from unfair or deceptive credit card practices without raising costs or limiting credit access for other borrowers.
Orszag, senior managing director of economic consulting firm Competition Policy Associates, Inc. (COMPASS), and Manning, a managing director of COMPASS, point out that during the past 25 years credit cards have evolved from a limited-use product primarily for high-income individuals to a financial tool widely relied upon daily by the majority of American families.
The study provides evidence that innovations in the credit card industry have benefited cardholders by making credit available to many more Americans at much lower prices than a generation ago. It also demonstrates that credit card interest rates and penalty fees reflect the risk of a borrower’s failure to pay.
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