What Your Credit Card Agreement May Look Like Soon


NEW YORK (MainStreet) — The Consumer Financial Protection Bureau debuted a new prototype for credit card agreements on Wednesday. The two-page form is intended to simplify credit card contracts so prices, risks and terms are easier for consumers to understand.

The agreements follow the CFPB’s release of a report on credit card complaints, which revealed that consumer confusion still persists when it comes to the terms and conditions of their credit card contracts and associated products like debt protection services.

The prototype agreement separates information about prices, risks and terms and is devoid of the legalese issuers typically weave into the agreement. It is organized into three simple sections: costs, changes and additional information.

>>Click here to see a copy of the new form on the CFPB’s website!

To help streamline the copy, the CFPB is also introducing formal definitions for terms commonly found in credit card contracts, including “APR,” “balance transfer” and even “card” itself. This precludes issuers from having to include unnecessarily long clauses or qualifiers for legal purposes at the expense of confusing consumers. The definitions will be available to consumers online and in print versions.

The forms are the second prototypes the CFPB is testing as part of its “Know Before You Owe” initiative. Back in May, the bureau unveiled two sample documents that could replace existing federally required mortgage disclosure forms.

The CFPB plans to pilot test out the form with Pentagon Federal Credit Union to get consumer feedback, and it is also asking the public to weigh in on the prototype agreement on its website.

The prototype clearly addresses the most common complaints the CFPB has fielded since its July 21 launch date. An entire section is devoted to how billing disputes are handled and the top-most section presents APRs, another frequent offender, in a way that includes qualifiers that can end up hidden in the fine print.

At 1,100 words, it is also considerably shorter than current credit card agreements, which the CFPB says tend to be about 5,000 words.  The CFPB has yet to specify where issuers would be required to advertise these forms, an important issue since many companies are already in the habit of hiding the terms and conditions of a card underneath the promotional materials on their website.

What do you think of the potential credit card agreements? Are there any areas that you think could still be improved upon? Let us know in the comments below.

—Jeanine Skowronski is staff reporter for MainStreet. You can reach her by email at Skowronski.jeanine@thestreet.com, or follow her on Twitter at @JeanineSko.

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