By John M. Pachkowski, J.D.
The Consumer Financial Protection Bureau is taking the first steps in
reviewing how the credit card market is functioning and the impact of credit
card protections on consumers and issuers.
The bureau is required by the Credit
Card Accountability, Responsibility, and Disclosure (CARD) Act to undertake a
review of the consumer credit market every two years. The last review occurred in October 2013.
To begin its latest review, the CFPB has issued a Request for Information to solicit information from the public about a number of
aspects of the consumer credit card market. Comments on the Request for
Information must be received by May 18, 2015.
Some of the specific areas that the bureau is requesting
information on include:
Changes in agreements & practices.
How the terms of credit card agreements and practices of credit card issuers
changed from its 2013 review. In particular, the bureau wants to know how card
issuers may have changed their pricing, marketing, underwriting, or other
practices and whether those changes have benefited or harmed consumers.
UDAP present? Information
is also being sought on the extent that unfair or deceptive acts or practices
still exist in the credit card market and the effects on consumers.
Collection practices. Debt
collection practices within the credit card industry is another area that the
CFPB is seeking comments with an emphasis on how often card issuers use third-party
collection agencies and how those relationships are managed.
Rewards programs. Finally,
the bureau is seeking information on how well consumers understand rewards
products and whether the disclosures for these reward products are being made
in a clear and transparent manner. Information is also being sought whether improvements
to these disclosures may also benefit consumers.
Commenting on the Request for Information, CFPB Director Richard
Cordray stated,
“With today’s inquiry, the Bureau is seeking to further understand how the
credit card market is working in practice and how credit card protections
affect consumers and credit card issuers. As we undertake this review, the
Bureau wants to ensure it understands the information that consumers, industry,
advocates, and other stakeholders believe is most relevant.”
Threat to card issuers. In a note to clients, Jaret Seiberg, an
analyst with Guggenheim Securities, stated “The CFPB in late 2015 will issue
its second report on the CARD Act, That report is likely to set the blueprint
for regulations and enforcement in 2016. This is why we see the report as a
threat to card issuers.”
For more information about the CFPB and credit cards, subscribe to the Banking and Finance Law Daily.
