Curbing interest rates for certain classes of popular credit products could save consumers money (cheap credit) or it could merely lead people to be unable to access credit (like when price controls create supply shortages). Sumit Agarwal, Souphala Chomsisengphet, Neale Mahoney, and Johannes Stroebel look at one such regulation—the 2009 Credit Card Accountability Responsibility and Disclosure Act—and find that it’s saved people lots of money:
We analyze the effectiveness of consumer financial regulation by considering the 2009 Credit Card Accountability Responsibility and Disclosure (CARD) Act in the United States. Using a unique panel data set covering over 150 million credit card accounts, we find that regulatory limits on credit card fees reduced overall borrowing costs to consumers by an annualized 2.8% of average daily balances, with a decline of more than 10% for consumers with the lowest FICO scores. Consistent with a model of low fee salience and limited market competition, we find no evidence of an offsetting increase in interest charges or a reduction in access to credit. Taken together, we estimate that the CARD Act fee reductions have saved U.S. consumers $20.8 billion per year. We also analyze the CARD Act requirement to disclose the interest savings from paying off balances in 36 months rather than only making minimum payments. We find that this “nudge” increased the number of account holders making the 36-month payment value by 0.5 percentage points, with a similarly sized decrease in the number of account holders paying less than this amount.
I would note more generally that the 111th Congress of 2009–2010 did more stuff than is generally recognized.
