Comments Submitted to the Federal Reserve by the Pew Safe Credit Cards Project (Regulation Z Substantive and Disclosure Requirements Under the Credit CARD Act of 2009)

Source Organization: Pew Safe Credit Cards Project

Author: Nick Bourke


11/19/2009 - The Pew Safe Credit Cards Project submitted comments (PDF) to the Federal Reserve Board regarding the Board’s latest proposed rulemaking under Regulation Z (Docket No. R—1370). The rules implement provisions of the Credit CARD Act of 2009 that are effective February 22, 2010. Pew’s comments focused on clarifying the rights of consumers in a credit card contract and increased responsibility for and disclosure from credit card issuers.

Specifically, Pew’s comments presented the following key points:

Changes in Terms and Interest Rate Increases

1.  Cards containing partially variable rates should not be eligible for the Credit CARD Act’s disclosure and limit on APR increase exceptions. 
2.  Limitations on increases in annual percentage rates, fees and charges should not be waived and creditors should not propose to increase these rates, fees or charges in exchange for benefits or upgrades.
3.  The Federal Reserve Board should implement a consumer’s right to reject rate increases by requiring issuers to close the account when a cardholder rejects the increase or to maintain the prior interest rate for future transactions.
4.  The Federal Reserve Board should require issuers to provide consumers with notice of right to cancel upon any interest rate increase or other significant change in the account terms even if the account is past due.
5.  The Federal Reserve Board should clarify that issuers are free to remove delinquency/penalty interest rate increases after less than six months of on-time payments or after a consumer pays on time during any six month period, known as a “rolling cure period.”

Fees for Overlimit Transactions

1.  Overlimit fees should not be designated as “service fees.” The Federal Reserve Board should prohibit periodic fees for coverage of overlimit transactions that apply even if the consumer has not exceeded the credit limit. 
2.  The Federal Reserve Board should require written or electronic agreement to overlimit transaction coverage promptly following any opt in provided orally. 

Ability to Pay

1.  Verification of ability to pay should be required using a fact-based determination of the relationship between delinquency and reliance on stated income, assets, and liabilities.
2.  The Federal Reserve Board should require inclusion of non-penalty fees in the calculation of minimum payments.

Deferred Interest  

1.  Deferred interest payments should be banned.  Short of that, sample disclosures provided by the Federal Reserve Board should be modified so that consumers receive specific information that can help them make better decisions.

Internet Posting of Credit Card Agreements

1.  Both current and historical credit card agreements should be made available by the Federal Reserve Board to allow researchers to track the evolution of agreements over time.
2.  Arbitration agreement and clauses allowing creditors to change terms “at any time” or “for any reason” should be included, if applicable, in the creditor’s online disclosures and those submitted to the Federal Reserve Board.

Other Considerations

1.  All maintenance or access fees should be expressed as a single annual fee.
2.  Issuers should be required to regularly (not less than semiannually) submit to the Federal Reserve Board information on their respective practices.  This should include information on interest rates and fees actually charged and types and incidences of changes in terms.  Issuers should also be required to submit information on the effect of certain provisions within the Act and each depository institution’s credit card income.

Read the full comment letter  (PDF).

Pew is no longer active in this line of work, but for more information visit the Safe Credit Cards Project on PewHealth.org.

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