Regulations May Be Hurting Credit Card Access for Low-Income Americans

April 20, 2016, Written By Bill Hardekopf
Samara Russia- 3 February 2015: Closeup studio shot of credit cards issued by the three major brands American Express VISA and MasterCard.

Since 2007, there has been a 250% increase in credit card-related regulatory restrictions, but these regulations may have contributed to a 50% drop in credit card originations among lower-income Americans, according to a new report.

The Harvard study examined U.S. consumer credit level trends, federal regulatory actions–including the CARD Act (2009) and the Fed’s 2008 credit card rules–and the CFPB’s pursuit of “unfair, deceptive, or abusive” activities. While researchers found regulatory actions have reduced card fees, they have also made it harder for lower-income Americans to qualify for credit.

Marshall Lux, a senior fellow at Harvard’s Kennedy School and senior advisor at The Boston Consulting Group, and Robert Greene, a research associate, believe this is a problem because:

  • Small businesses need access to credit cards. Almost one in five small businesses (those with one to nine employees) use credit cards to finance expenses.
  • If Americans cannot get a credit card, they are more likely to find a more expensive form of credit. In fact, in 2012, there were more payday lenders than McDonald’s in the United States.
  • The CFPB found nearly half of Americans in low-income neighborhoods have no credit score, which will impede economic mobility.

The report also found most Americans are happy with their credit cards. In 2001, 6% said they were dissatisfied with their credit card, and 8% were unhappy in 2012–after the surge in regulations. In fact, 73% of Americans think credit cards make their personal financial management easier.



The information contained within this article was accurate as of April 20, 2016. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.