CFPB’s CARD Act Request for Information Garners Consumer and Industry Comments

Agency Rule-Making & Guidance Consumer Finance Credit Cards CFPB

As previously covered in InfoBytes, the CFPB issued a notice and request for information seeking public comments regarding the consumer credit card market. The request, which closed for public comment on June 8, received 32 public comments from consumer education groups as well as retail industry groups.

The Financial Services Roundtable and the Consumer Bankers Association (the Associations). On June 8, the Associations—one representing integrated financial services companies, and the other representing retail banking and personal banking services—submitted a joint comment letter addressing a number of the issues in the CFPB’s request. The Associations put forth the following recommendations, among others, for consideration:

• “With respect to deferred interest products, we encourage the Bureau to rely on the existing, robust regulatory regime and to not take further action on these products”;
• “hold third-party comparison sites making representations about credit cards responsible for their interactions with consumers”;
•  “streamline processes for consumers to elect to receive electronic disclosures”;
• “credit card rewards programs have successfully developed under an effective self-regulatory construct, and that consumers with variable interest rate products are generally aware of the current interest rate environment, negating the need for additional regulations in both regards”; and
• “strong debt collection rules are important for consumers and issuers alike, and burdensome restrictions on communications should be avoided”.

Consumer Action (CA). Also on June 8, the CA—advocating for underrepresented consumers—submitted a comment letter to the CFPB request for information suggesting that the Card Act has been mostly effective “to keep credit card issuers in check” but that “some practices . . . have worsened over time.” Specifically, among other things, the CA provided the following recommendations:

• “retailers and cards that offer deferred interest not be allowed to apply interest until the end of the deferral period, and that retroactive interest be prohibited, and that the interest charged when a deferred interest period ends be on a going forward basis only”;
• “the clause alerting applicants that the terms, rates, and fees ‘are subject to change at any time for any reason’ remains in some card notices . . . While technically legal, this one-sided contract that penalizes consumers who [do] not perfectly abide by account terms and conditions yet gives card issuers a pass on committing to its end of the contract remains an unfair business practice and should be prohibited by the Bureau “;
• “consider requiring more prominent disclosure of a financial link between comparison sites and card issuers”;
• “true secured cards are remarkably risk-free. One danger is when the issuer does not report payment history to credit bureaus. Most consumers want a secured card to build credit and failure on the part of the issuer to report to credit bureaus means the customer is captive to the secured issuer. Users should be educated beforehand as to the proper use of a secured card so they can see it as a tool to help them graduate to an unsecured card eventually. For example, they should be aware that cash advances carry very high interest rates and start accruing interest on transactions immediately”; and
• “we also strongly support the Bureau’s planned prohibition on class-action bans in arbitration clauses and hope to see the Bureau release a final rule shortly.”