[Federal Register Volume 77, Number 245 (Thursday, December 20, 2012)]
[Notices]
[Pages 75410-75412]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-30609]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2012-0048]
Request for Information Regarding Credit Card Market
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Notice and request for information.
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SUMMARY: Section 502(a) of the Credit Card Accountability
Responsibility and Disclosure Act of 2009 (CARD Act or Act) requires
the Bureau of Consumer Financial Protection (Bureau) to conduct a
review (Review) of the consumer credit card market, within the limits
of its existing resources available for reporting purposes. In
connection with conducting that Review, and in accordance with Section
502(b) of the CARD Act, the Bureau is soliciting information from the
public about a number of aspects of the consumer credit card market,
which are described further below.
DATES: Comments must be submitted on or before February 19, 2013 to be
assured of consideration.
ADDRESSES: You may submit responsive information and other comments,
identified by Docket No. CFPB-2012-0048, by any of the following
methods:
Electronic: http://www.regulations.gov. Follow the
instructions for submitting comments.
Mail/Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1700 G
Street NW., Washington, DC 20552.
Instructions: The Bureau encourages the early submission of
information and other comments. All submissions must include the agency
name and docket number. In general, all submissions received will be
posted without change to http://www.regulations.gov. In addition,
submissions will be available for public inspection and copying at 1700
G Street NW., Washington, DC 20552, on official business days between
the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an
appointment to inspect the documents by telephoning (202) 435-7275.
All submissions, including attachments and other supporting
materials, will become part of the public record and subject to public
disclosure. Sensitive personal information, such as account numbers or
social security numbers, should not be included. Submissions will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: Wei Zhang, Division of Research,
Markets and Regulations, Consumer Financial Protection Bureau, at (202)
435-7700, or [email protected].
Authority: 15 U.S.C. 1616(a), (b).
SUPPLEMENTARY INFORMATION: Section 502(a) of the CARD Act \1\ requires
the Bureau to conduct a review of the consumer credit card market. To
inform that review, Section 502(b) \2\ instructs the Bureau to seek
public comment. Accordingly, the Bureau hereby invites members of the
public, including consumers, credit card issuers, industry analysts,
consumer advocates, and other interested persons to submit information
and other comments relevant to the issued expressly identified in
Section 2 below, as well as any information they believe is relevant to
assessing the impact of the CARD Act on the consumer credit card
market.
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\1\ See 15 U.S.C. 1616(a).
\2\ See 15 U.S.C. 1616(b).
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1. Background: The CARD Act
The CARD Act was signed into law in May 2009.\3\ Passage of the Act
was expressly intended to ``establish fair and transparent practices
related to the extension of credit'' in the credit card market.\4\ To
achieve these agreed-upon purposes, the Act changed the requirements
applicable to credit card pricing in a number of significant respects.
Prior to the CARD Act, the applicable provisions of the Truth in
Lending Act (TILA) and its implementing regulation (Regulation Z)
focused principally on how companies needed to disclose product pricing
terms to consumers, and otherwise placed few substantive limits on
industry practice.\5\ After the CARD Act, however, TILA and Regulation
Z also imposed direct limits on a number of pricing practices that
Congress deemed unfair or unclear to consumers. The following is a
high-level summary of CARD Act changes. Further information about the
CARD Act is available on the Bureau's Web site at
www.consumerfinance.gov/credit-cards.
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\3\ The CARD Act's provisions took effect in three stages:
August 2009, February 2010, and October 2011.
\4\ Text of H.R. 627 (111th), available at www.govtrack.us/
congress/bills/111/hr627/text.
\5\ The Federal Reserve Board promulgated several substantive
rules shortly before passage of the CARD Act, but they had not taken
effect before the Act was signed into law.
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(a) Interest Rate Increases
The Act limits the circumstances under which credit card issuers
can increase interest rates on existing and new balances. For new
balances, the
[[Page 75411]]
card issuer must give the consumer 45 days written notice of a rate
increase, and most increases are barred during the first year after the
account is opened. For existing balances, the card issuer generally
cannot increase rates unless the consumer has missed two consecutive
monthly payments and the requisite written notice has been provided.\6\
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\6\ CARD Act Sec. 101; see also 12 CFR 1026.9(c) and 55.
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(b) Penalty Fee Restrictions
Penalty fees, such as late fees or overlimit fees, must now be
``reasonable and proportional'' to the relevant violation of account
terms. The implementing rules establish a safe harbor benchmark for
reasonable and proportional late fees of $25 for a first late payment,
and $35 for a second violation within the next six months.\7\
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\7\ CARD Act Sec. 102(b); see also 12 CFR 1026.52(b).
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(c) Overlimit Fee Opt-In
There are additional restrictions on the overlimit fees assessed
when a consumer exceeds his or her assigned credit line. Following the
Act, issuers may only charge such fees if the consumer expressly opts
in to permit overlimit transactions.\8\
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\8\ CARD Act Sec. 102(a); see also 12 CFR 1026.56.
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(d) Payment Timing
Payments must now be due on the same day of each month. In
addition, the Act and implementing regulations contain a set of rules
as to when payments must be treated as timely. There are also rules
about how much notice cardholders must receive before a bill is due.\9\
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\9\ CARD Act Sec. 106; see also 12 CFR 1026.5(b)(2)(ii), 10,
7(b)(11)(A). The Act also barred so-called ``double-cycle billing,''
a practice that enabled an issuer to charge interest on purchases
for a billing cycle prior to the cycle for which the consumer paid
late. CARD Act Sec. 102(a); see 12 CFR 1026.54.
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(e) Payment Allocation
Subject to certain exceptions, when a consumer makes a payment on
the account, issuers are now required to allocate that payment first to
balances that are subject to higher interest rates.\10\
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\10\ CARD Act Sec. 104; see also 12 CFR 1026.53.
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(f) Monthly Statements
Monthly statements must describe how long it would take the
consumer--and how much it would cost--to pay the full balance on the
card by paying only the required minimum monthly payment. For
comparison, the statement must also show how much it would cost the
consumer each month to pay off his or her current balance in three
years. Regulations issued by the Federal Reserve Board and inherited by
the Bureau, which took effect along with the CARD Act implementing
rules, require each monthly statement to include the total amount of
interest charged year to date, and a similar disclosure relating to the
total amount of fees.\11\
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\11\ 12 CFR 1026.7(b).
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(g) Ability to Repay
Card issuers cannot provide or increase a credit line on a card
until they have taken reasonable steps to consider the ability of the
consumer to make payments on the amount of that line.\12\
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\12\ CARD Act Sec. 109; see also 12 CFR 1026.51(a).
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(h) Student Cardholders
The Act imposed new restrictions related to on-campus marketing of
credit cards. In addition, any credit card applicant under 21 years of
age must demonstrate his or her ability to make payments on the
account.\13\
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\13\ CARD Act Sec. Sec. 301, 303, 304; see also 12 CFR
1026.51(b), 57.
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2. Issues on Which the Bureau Seeks Public Comment for Its Review
In connection with its pending Review, the Bureau seeks information
from members of the public about how the credit card market is
functioning following the implementation of the CARD Act. Thus, the
Bureau seeks comments about any of the subjects addressed in (a)
through (g) below, which are identified in Section 502(a) of the CARD
Act. In addition, the Bureau wants to be alerted to and understand the
information that consumers, credit card issuers, consumer groups, and
others believe is most relevant to assessing the impact of the Act on
the consumer credit card market, so this list of subjects should not be
viewed as exhaustive.
Please feel free to comment generally and/or respond to any or all
of the questions below but please be sure to indicate in your comments
on which topic areas or questions you are commenting:
(a) The Terms of Credit Card Agreements and the Practices of Credit
Card Issuers
How have the substantive terms and conditions of credit card
agreements changed following the CARD Act? How have issuers changed
their pricing, marketing, underwriting or other practices? What changes
have benefited consumers? Are there changes that have harmed consumers?
If there are such harms, how have they been caused, and how could they
be mitigated, and at what cost?
(b) The Effectiveness of Disclosure of Terms, Fees, and Other Expenses
of Credit Card Plans
How effective are post-CARD Act disclosures of rates, fees, and
other cost terms of credit card accounts? Do consumers better
understand the true cost of credit card use in light of the CARD Act?
To what extent and in what ways do consumers use the new information
that is now available to them about credit card costs? What further
improvements in disclosure would benefit consumer cardholders at this
point, and what costs would be incurred in providing such disclosures?
(c) The Adequacy of Protections Against Unfair or Deceptive Acts or
Practices Relating to Credit Card Plans
Do unfair or deceptive acts and practices still exist in the credit
card market, and if so, in what form and with what frequency and
effect? How might those acts and practices be prevented and at what
cost? Have issuers circumvented, or tried to circumvent, any CARD Act
protections against unfair or deceptive acts or practices?
(d) Whether implementation of the CARD Act has affected the cost and
availability of credit, particularly with respect to non-prime
borrowers?
Controlling for risk, has the upfront interest rate or the overall,
all-in cost of credit changed as a result of the CARD Act? Are there
particular segments of the credit card market for which the Act has
impacted the cost or access to credit? Has the CARD Act had any non-
price impacts on access to credit, particularly for consumers who do
not have prime credit scores?
(e) Has the CARD Act impacted the safety and soundness of any credit
card issuers?
Has the Act impacted the quality of issuer assets or issuers'
return on equity? Are there ways to mitigate any adverse consequences
and, if so, at what cost to consumer protections?
(f) Has the CARD Act affected the use of risk-based pricing?
To what extent are card issuers still engaged in risk-based
pricing? What practices have issuers adopted in the wake of rules that
restrict account repricing, and how have these practices affected
consumers?
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(g) Has implementation of the CARD Act had any effect on credit card
product innovation?
To what extent and in what ways has the Act spurred or hampered
product innovation in the credit card market? If the Act has impacted
innovation, what have been the follow-on impacts on consumers and other
market participants?
Dated: December 14, 2012.
Garry Reeder,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2012-30609 Filed 12-19-12; 8:45 am]
BILLING CODE 4810-AM-P