United States: CFPB Seeks Comment On CARD Act’s Impact On Consumer Credit Card Market

Pursuant to Section 502 of the Credit Card Accountability Responsibility and Disclosure Act of 2009 ("CARD Act"),¹ the Bureau of Consumer Financial Protection ("CFPB") is conducting a review of the consumer credit card market. As part of its review, the agency is seeking comment by February 19, 2013, from consumers, credit card issuers, industry analysts, consumer advocates, and other interested persons regarding the consumer credit card market.² As noted in the CFPB's Notice and Request for Information ("Notice"),³ the agency intends to use comments on the Notice to inform its mandatory report to Congress on the credit card market.⁴

Statutory Background

As described in the Notice, the CARD Act amended the Truth in Lending Act ("TILA") to "establish fair and transparent practices related to the extension of credit" in the credit card market.⁵ Pursuant to the CARD Act, TILA and its implementing rules at Regulation Z impose:

• Limitations on interest rate increases for existing and new balances;⁶
• Restrictions on penalty fees;⁷
• Opt-in requirements for over-limit transactions and fees;⁸
• Payment due date and notice procedures,⁹ and the bar on double-cycle billing;¹⁰
• Requirements on the allocation of payment to balances with higher interest rates;¹¹
• Disclosure requirements in monthly statements;¹²
• Responsibilities on card issuers to determine whether a consumer has the ability to repay a specified credit line;¹³ and
• Restrictions on issuing cards to students and applicants under 21 years old.¹⁴

Specific Areas for Comment

According to the Notice, the CFPB is soliciting comment on the consumer credit card market and implementation of the CARD Act, generally,¹⁵ and specifically seeks information regarding the following areas:

• Modifications in credit card issuer practices and credit card agreement terms;¹⁶
• Disclosures of terms, fees, and other plan expenses;¹⁷
• The existence of unfair or deceptive acts or practices;¹⁸
• Changes, if any, in borrowers' access to credit and the cost of accessing credit, especially for non-prime borrowers;¹⁹
• The CARD Act's adverse consequences on credit card issuers;²⁰
• Card issuers risk-based pricing methods and practices;²¹ and
• The impact of the CARD Act on product innovation in the credit card market.²²

Comment Considerations

In considering whether to comment on the issues raised in the Notice and other relevant aspects of the CARD Act, potential commenters should carefully review the types of quantitative data and other information available to bolster points and concerns they wish to highlight. In this regard, the CFPB has stressed the importance of data in framing its policymaking decisions and analyses of the consumer financial services market. Examples of important data and quantitative factors are evidence of the expense, obstacles, and difficulties consumer credit card providers have experienced in attempting to meet the CARD Act's goals of increased fairness and transparency.

In addition to using the data it gathers pursuant to the Notice to guide its report to Congress, the CFPB expects to use the information in determining future policy and rulemaking regarding the credit card market. Therefore, industry participants who decide to submit a comment may consider including a detailed discussion of how the CARD Act has fundamentally changed the way they do business, including the extent to which consumer access to credit has been impacted by the Act.

Credit card issuers and other relevant groups submitting comments to the CFPB should take note that the Notice offers no safe harbor; any information they submit to the CFPB concerning their particular policies and practices could lead to potential review and action by the CFPB.

Footnotes

^{1 Pub. Law No. 111-24, 123 Stat. 1734 (2009), enacted at 15 U.S.C. § 1616.}

^{2 See 15 U.S.C. 1616(b).}

^{3 See CFPB, Request for Information Regarding Credit Card Market (December 19, 2012), available at http://files.consumerfinance.gov/f/201212_cfpb_2012-0048.pdf}

^{4 See 15 U.S.C. 1616(a).}

^{5 See Notice at 3, referencing the text of H.R. 627 (111th), available at http://www.gpo.gov/fdsys/pkg/BILLS-111hr627enr/pdf/BILLS-111hr627enr.pdf}

^{6 See CARD Act § 101; see also 12 C.F.R. 1026.9(c) and 55.}

^{7 See CARD Act § 102(b); see also 12 C.F.R. 1026.52(b).}

^{8 See CARD Act § 102(a); see also 12 C.F.R. 1026.56.}

^{9 See CARD Act § 106; see also 12 C.F.R. 1026.5(b)(2)(ii), 10, 7(b)(11)(A).}

^{10 See CARD Act § 102(a); see also 12 C.F.R. 1026.54.}

^{11 See CARD Act § 104; see also 12 C.F.R. 1026.53.}

^{12 See 12 C.F.R. 1026.7(b).}

^{13 See CARD Act § 109; see also 12 C.F.R. 1026.51(a).}

^{14 See CARD Act §§ 301, 303, 304; see also 12 C.F.R. 1026.51(b), 57.}

^{15 Notice at 2.}

^{16 See id. at 6.}

^{17 See id.}

^{18 See id. at 6-7.}

^{19 See id. at 7.}

^{20 See id.}

^{21 See id.}

^{22 See id. at 7-8.}

The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.