CFPB Proposes Two-Page Credit Card Agreement
By Marcia Frellick
December 7, 2011
The federal agency charged with resolving consumers’ credit card questions and complaints on Wednesday proposed a two-page credit card agreement meant to simplify terms and make fees and penalties more clear.
The Consumer Financial Protection Bureau (CFPB) wants the public to weigh in on the prototype that, if approved, would be optional for issuers. (Instructions on how to comment are at the link above.)
Instead of an average 5,000 words in disclosures, this form averages 1,000 and the information is broken down into costs, changes and additional information. Fees and interest rates are displayed prominently, upfront and in bigger type. A separate set of definitions would be available online or in print form.
The announcement of the agreement follows the CFPB’s release of its interim report outlining its progress after three months in action. One of the conclusions drawn from that report was that consumers are confused by credit card terms and contracts, Raj Date, special adviser to the Treasury Secretary for the CFPB, said in a statement.
More than 5,000 credit card complaints were filed with the CFPB following its launch in July and the agency reported resolving more than 3,100 of those complaints. Consumers disputed responses in 400 cases, or about 13 percent of the time.
In his report, Date says only half the calls the consumer response team handled turned into actual complaints. The other half were general feedback calls or inquiries that were answered over the phone or directed to the appropriate resource.
Date has been managing the bureau while the Senate debates confirmation of Richard Cordray, President Obama’s nominee for director.
Bankers say complaints small fraction of total
Nessa Feddis, vice president and senior counsel for the American Bankers Association, says the complaints represent a very small number of credit card holders nationwide and complaints in general have dwindled since the implementation of the Credit CARD Act of 2009.
“There are no big surprises here, she says. “The number of complaints has dropped off dramatically since 2009 … The point is there are 383 million credit card accounts in the U.S. and less than one-tenth of 1 percent have submitted a complaint. You have to look at the numbers relatively speaking.”
Date also mentioned two other general observations in addition to the apparent confusion over terms — that complaints have led to discovery of fraudulent charges which has helped pinpoint recurring scams and that often the issuer and consumer have conflicting factual accounts. In many such cases, however, issuers have been willing to resolve the complaint, Date says.
Feddis says the numbers, at least the ones in the interim report, don’t indicate that consumers are not understanding the terms. “They didn’t explain how they drew that conclusion. They may have other information, they just didn’t say what it was.”
The biggest categories for complaints, in order were: billing disputes (13.4 percent); APR (annual percentage rate) or interest rate (11 percent); and identity theft (10.8 percent).
About 84 percent of the complaints have been sent to credit card issuers for review and response. Five percent were classified incomplete either because the consumer provided insufficient identifying information (such as a blank entry in the name data field) or because the consumer requested that the complaint not be sent to the issuer. The remaining complaints were still pending on Nov. 15. These include complaints sent back to consumers for additional information (3.4 percent of complaints) and complaints under review at CFPB (7.8 percent).
Agency now handling mortgage complaints as well
The agency started with only credit card complaints because credit card problems have been historically high-priority for consumers, but this month it began to accept complaints filed about mortgages and home equity lines of credit as well. You can log onto the CFPB website and click on the appropriate box to get you started.
Date said in a statement that the bureau intends to handle complaints for all financial products and services by the end of next year. The CFPB’s toll-free phone number provides services in 191 languages, and the bureau provides services for the hearing- and speech-impaired.
The CFPB was created when President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act. A critical part of the CFPB’s work is listening and responding to consumers about financial products and services.
Kathleen Day with the Center for Responsible Lending said the bureau is sparing consumers from having to bounce around to different agencies to get answers.
“It used to be when people were frustrated with their credit card company, they would go to the regulator, who would then bring the complaint back to the company and it would go around and around. It was ridiculous,” Day says.
“One of the things the CFPB hopes to do is to police the markets for bad practices and stamp them out before they become widespread. It’s not a very efficient way to do things to wait till everybody in the world hates their credit card company and then pass legislation. It’s much more elegant and efficient to listen to people in real time.”
The bureau is also seeking comments on its proposal to provide a searchable public database that contains various data fields for each complaint, but without personal information attached. Information could be used by organizations such as consumer advocacy groups to analyze trends.
The deadline for comments is Jan. 30 and you may submit them electronically at http://www.regulations.gov (follow the instructions for submitting comments); or by mail:
Monica Jackson, Consumer Financial Protection Bureau
1500 Pennsylvania Avenue, N.W. (Attn: 1801 L Street)
Washington, D.C. 20220.
You can reach the bureau toll-free at 1-855-411 CFPB; by TTY/TDD phone: 1-855-729-CFPB; by fax: 1-855-367-2372; or by mail:
Consumer Financial Protection Bureau
P.O. Box 4503
Iowa City, IA 52244.