Credit Card Confusion: CFPB Developing Simpler Credit Card Form

Imagine a credit card agreement that's short, to the point and easy to understand. If one federal agency gets its way, what you're picturing could become a reality.

The Consumer Financial Protection Bureau launched a campaign aimed at simplifying credit card agreements Wednesday. The agency is asking the public for feedback on a more transparent credit card form that is broken down into three sections -- costs, changes and additional information -- and features information high up on fees, interest rates and other information.

The bureau will also be soliciting feedback through a pilot program that will offer the agreement to customers of the Pentagon Federal Credit Union.

"When a consumer has to read through pages of legal fine print in their credit card agreement to figure out how their card works -- it's easy to get confused," Raj Date, a special adviser to the Treasury said in a statement announcing the program. "With a short, simple, easy-to-understand credit card agreement, consumers can clearly see the terms of the deal and make the decisions that are right for them."

The announcement comes after a CFPB report analyzing more than 5,000 credit card complaints found that customers are confused by their credit card terms. The report also found that consumers are still complaining about interest rates, billing disputes and other issues, despite legislation passed in 2010 that aimed to make credit cards more transparent.

The complaint system was the first of its kind for the CFPB, which launched in July. The agency plans to expand the complaint system to all financial products starting with mortgages.

The bureau, which was created as part of the Dodd-Frank Financial Reform legislation, has been controversial since before its inception. Consumer advocates welcomed the agency as a necessary step towards preventing another financial fallout, while the financial industry and some lawmakers derided it as over-regulation.

The new credit card form may be coming at just the right time. Credit card purchases climbed more than 10 percent last quarter after an 8.6 percent increase and a 9 percent boost in the first and second quarters respectively, according to statistics from First Data. The findings may indicate that credit card use is edging up after consumers cut back on debt immediately following the recession.

Check out an early version of the CFPB's simplified credit card form:

Comments

[Jay Gould]

04:02 PM on 12/14/2011

I've already posted on this, but having examined CFPB's proposed version of a "shorter, simpler credit card agreement," here is an update.

The CFPB's vision for a "shorter, simpler credit card agreement" is neither shorter, nor simpler than the ones currently used by card issuers. The CFPB claims that the whole agreement consists of two pages, whereas it is actually eight pages long, once you include the part that consists of explanations of the terms used in the contract.

When you compare CFPB's proposed version to one currently used by American Express (see http://blog.unibulmerchantservices.com/do-you-understand-your-new-credit-card-agreement), they are both eight pages long, even though AmEx has dedicated a whole page to its rewards program, which the CFPB does not have to worry about. Similarly, there is not much of a difference in how the two agreements explain various terms and conditions.

[Jay Gould]

01:05 PM on 12/08/2011

The CARD Act of 2009 already passed provisions that were designed to ensure that credit card agreements were clear and easy to understand and by the CFPB’s own assessment it has by-and-large achieved that goal. Fully 60 percent of consumers polled by the CFPB have said that they already find the agreements both easier to read and more clear. 70 percent of cardholders have noticed that monthly statements now tell them the consequences of making only minimum payments. An even greater proportion - 77 percent - said they were aware of what the amount of the cost of making a late payment.

So the CFPB is attempting to do something that the CARD Act has already achieved quite successfully, even by the CFPB’s own assessment. It’s puzzling to me why the agency has decided to take up this task, but I think that it is a waste of government resources. http://blog.unibulmerchantservices.com/do-you-understand-your-credit-card-agreement

[webwzrd]

05:03 AM on 12/08/2011

This is what Republicans are fighting tooth and nail against. They blame the consumer for mortgage and credit fraud, while protecting lender's use of 3000 page ultra micro fine print forms written in incomprehensible Chinese legaleze on crack.

My thanks to you Dodd, Frank, Elizabeth Warren, Obama and the folks at CFPB for this.

[exilist]

02:48 AM on 12/08/2011

Looks great! I'm sure the banks and their Republican shills will HATE it.

[Olderandwiser55]

10:09 PM on 12/07/2011

Wow, that looks great! Imagine the same type of form with the same information for all credit cards! Thank you CFPB!!!!

[ColoradoCool]

02:14 PM on 12/07/2011

This is why the financial industry is fighting the Consumer Protection Agency like a bunch of r@b!d hyenas. They don't want fair practices for the consumer!

[Olderandwiser55]

10:10 PM on 12/07/2011

True-they like to trick people...imagine if people can clearly see their fees