Community banks that offer credit cards may want to check out the latest information coming from the Consumer Financial Protection Bureau.
The CFPB recently unveiled its Know Before You Owe: Credit Cards project, offering up a prototype of a two-page customer credit card disclosure for comments.
“A lot of the information in a credit card agreement is contractually necessary but generally uninformative to consumers,” wrote Marla Blow on the CFPB blog.
The Bureau will test the disclosure with one card issuer; will work with consumers to see what they actually read on existing agreements compared to what they get from the prototype; and will accept comments from credit card issuers and consumers. (To share comments on the disclosure, scroll down to the bottom of the page at www.consumerfinance.gov/credit-cards/knowbeforeyouowe/ and type in the box provided.)
The CFPB has said that this disclosure will not be mandatory, and for now, they are focused on banks with $10 billion or more in assets.
Michelle Singletary reports in the Washington Post that in 2010, only one-third of cardholders said they “completely” understand what they are getting into. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act, which went into effect in 2010, already required card issuers to make significant changes. The Federal Reserve followed up with additional rule-making, which included a provision to provide customers with a one-page summary of key terms.
In a speech last February, then-CFPB head Elizabeth Warren lauded credit card issuers for progress made under the CARD Act, but said some were looking for ways to exploit “loopholes” in the law, requiring additional rules to be written – a process that “is costly for consumers and the industry,” she said.
“Because it multiplies the number and complexity of rules, this approach creates special challenges for those smaller banks and credit issuers that still offer credit cards to their customers,” Warren added.
Currently, the CFPB is also accepting comments on its policy regarding credit card complaint data. The Bureau has set up on online complaint system, which allows individuals to submit credit card grievances. If the card issuer falls under the CFPB’s supervision (banks with $10 billion or more in assets), the Office of Consumer Response forwards the complaint to that issuer. The issuer must then follow up with the CFPB to report that the complaint has been resolved.
The policy, then, outlines how this complaint information is shared with Congress and the public. “The CFPB has broad authority to make public information that is not required to be given confidential treatment,” according to the policy.
“For more than 20 years, the banking industry has strongly supported efforts to provide consumers with a short, easy-to-understand summary of their credit card agreement. The model released by the Bureau is a good first step, but could be made even shorter, as well as less susceptible to costly lawsuits and the higher consumer prices that come from them,” the American Bankers Association said in a statement.
Community banks may want to use all or part of the CFPB article, “How Do I Shop for a Credit Card?” (with attribution) in their customer newsletter, blog or Facebook page.