The CFPB released its report on the consumer credit card market. Essentially, this is 300 pages of the Bureau tooting their own horn regarding improvements in the credit card market in the wake of the CARD Act. The report covers credit card agreement terms, issuer practices, adequacy of protections against unfair or deceptive acts or practices relating to credit cards, and whether the CARD Act affected the cost and availability of credit. The report does portray credit unions, on a whole, in a better light than other card issuers when it comes to providing consumer protections to cardholders.
Of special note, over 50 pages of the report addresses deferred interest promotions. While the CARD Act did not prohibit deferred interest offers, it does require issues to take a number of steps that may have been intended to improve payoff rates. In particular, the Act requires that payments in the excess of the minimum payment in the last two months of a deferred interest promotion be allocated entirely to the promotional balance, and that promotional rate terms for all credit cards must last a minimum of six months.
The report, and Bulletin 2014-02 (issued September 3, 2014), highlight the CFPB’s concern of abusive practices and consumer harm related to promotional APR and deferred interest offers. Among their concerns is the allocation of payments between deferred interest / promotional balances and non-promotional balances, total costs if the promotional balances are not paid within the period (back-end pricing), and the ability to repay the resulting higher finance charges if the balance is not paid off. The Bureau is studying deferred interest promotions further and may take steps to “promote a more fair and transparent market.”
Other concerns highlighted in the report include subprime credit card company offerings, unclear rewards programs, debt collection practices and lengthy and complex credit card agreements.
The report also introduced two of the CFPB’s new favorite phrases: “wake of the card act” – used seven times, and “phenomenon” – used six times, and includes 154 charts and graphs. The CFPB is definitely a data centric bureau.
