“However, he says, there is no evidence that this latter risk has materialized. “The risks that it brings are that credit card companies will develop new unfair practices that are not addressed in the Card Act and that the government overregulates credit such that consumers’ access to credit is unduly restrained. This final approach works well for discrete issues, Reiss says. “So, again, the jury is out on whether disclosure is a sufficient response to the problems that consumers face in the credit card industry.”Īnd number three: This also was also addressed in the Card Act, which limited certain unfair terms that had been prevalent in the industry.
“Disclosure has, however, its own limitations, particularly when it comes to complicated financial products like mortgages,” Reiss says. The second: This, in fact, was covered by the Credit Card Accountability Responsibility and Disclosure Act of 2009, which requires that credit card companies be more transparent about the terms of the products that they offer. There is, however, contradictory evidence as to whether financial education is effective at helping people make better financial decisions, Reiss says. Regarding the first: the CFPB is setting up an Office of Financial Education and, of course, it is launching its “Know Before You Owe” campaign. “It can require even clearer disclosures by credit card companies and it can regulate the types of products that credit card companies issue to ensure more standardized product offerings across the industry.” “ It can seek to provide financial literacy training to a broad swath of the population,” Reiss say. Technically, the CFPB has three approaches it can take to this problem, David Reiss, a professor of law at Brooklyn Law School says. “The CFPB may want to test a credit card agreement printed in 10 or 12 point type, while still observing the specific requirements that govern format and type face size for some of the disclosures, and ask consumers for their reaction to such a document,” Torian suggests, adding, “there really is no easy answer.” That’s a maybe, although credit card companies are likely cringing at the thought of the printing costs. How about something simpler, say the idea that printing a credit card agreement in 12-point type (which would make it 30-pages long, but never mind)? “Compliance with such a requirement would pose an unreasonable added expense and compliance burden for the credit card issuers,” she says. Torian, a partner with ReedSmith LLP, it will have to determine what words required definitions, which would be a major undertaking since all credit card agreements do not contain the same terms. If the CFPB decided to move forward with something like this, says Roberta G. That said, for any company that writes a financial contract with a consumer-from telecos to rent-a-centers to credit card companies-the slow path CFPB is taking is illustrative.Ĭonsider some of the suggestions that consumer advocates have tossed out to remedy the long-standing issue of hard-to-read contracts:Ĭredit card agreements posted on-line that have pop-ups to define terms unfamiliar to consumers. Whether that is good news or bad, depends on your perspective and political leanings. So far, though, there is no sign of the demonic, out-of-control government overreach that its critics painted when the bureau moved through Congress. Most likely the CFPB will step up its game if the president’s nominee to head the agency, former Ohio Attorney General Richard Cordray, is confirmed by Congress ( which he probably won’t be).
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