Consumer Financial Protection Bureau credit card problems
There have been many changes to credit cards in the past few years. The most noticeable change is on your bill. The new format makes it easier to see how long it will take you to pay off your balance / debt and the interest you will pay.
It’s a big week for the CFPB as the Senate is expected to vote on the first ever director on Thursday. I was at the confirmation hearing for former Ohio Attorney General Richard Cordray in September. The committee recommended confirmation, but a full Senate vote has been postponed for months as several dozen Republicans vow to block any nominee. They admit it’s not Cordray they are blocking, but the entire agency that Republicans feel is too powerful.
Despite the director roadblock, the agency continues to get input from consumers and industry. The input is leading to changes.
The agency took complaints for credit cards first because the agency says it’s the most widely used financial product and historically there have been a large number of complaints.
The agency just released its first review of credit card data collected from July through October 2011. Less than half the calls to the agency resulted in a formal filing of a credit card complaint. The CFPB says most of the calls resulted in general feedback or consumers were directed to informational resources to answer general questions.
“When consumers contact us, we get a snapshot of how the consumer finance markets are working,” said Raj Date, Special Advisor to the Secretary of the Treasury on the CFPB. “And we are learning that there is a lot of consumer confusion about credit card terms. We will continue to work with consumers, credit card companies, government agencies, and others to improve consumer education and ensure CFPB’s regulation, supervision, and enforcement efforts are effective.”
In 74% of the complaint cases, the card issuer reported full or partial resolution to the problem. In almost 20% of the cases, there was no relief. The important number — 71% of the time the consumer agreed with the resolution.
The top complaint categories include billing disputes, APR / interest rate, and identity theft, fraud, or embezzlement.
Consumers don’t understand credit card statements
While the sample was unscientifically collected, the CFPB found a pattern of complaints. It says consumers are struggling to understand the terms of credit cards and products like debt protection services.
Secondly, there is a pattern of third party fraudulent charges on consumer credit cards. The complaints have revealed recurring scams. In some cases, the information has been passed along to authorities to investigate.
Third, some complaints do not match the facts from the credit card company, however most card issuers have been willing to resolve the issue.
Let your voice be heard in Cleveland Wednesday night
According to Bloomberg Businessweek, four people briefed on the still announcement said the agency will propose a more user-friendly credit card agreement as well as an “owner’s manual” for cardholders so they know what to do when their card is lost. Bloomberg reports that it’s sources say the use of this simplified form will be used voluntarily by credit card companies. The sources were not named in the article as the announcement is still not public.
It wouldn’t be surprising if this simplified form is announced, as it follows the other Know Before You Owe announcements. The agency is creating a simplified mortgage form, and taking consumer and industry comments, so you know what you’ll owe when you sign up for the loan.
Thus far, the agency has focused on making financial products easier to understand for the average consumer. Legal lingo and confusing terms and conditions have been removed from forms already reviewed. The mortgage forms that have been revamped clearly display the terms and conditions of the loan in an easy to follow format. There are few words, but lots of focus on the actual numbers and likely cost of the loan.