Obama Proposes Initiative for Making Credit Terms Easier to UnderstandDecember 12, 2011 - 10:13 am
In 2009, a number of improvements were made to credit card statements and agreements in an effort to help consumers better understand their credit card policies. The 2010 Dodd-Frank law created a federal agency, The Consumer Financial Protection Bureau, for protecting consumers against potentially abusive practices of mortgage lenders and credit card companies. On Wednesday, December 6th, the Obama administration announced another initiative for helping consumers understand their credit card terms, as the Consumer Financial Protection Bureau has discovered that consumers are still confused over credit card issues.
There are more than 500 million credit cards in circulation in the United States, accounting for about $700 billion of household debts.
Bank Industry Concerns
Banking industry officials expressed concerns over the initiative which would result in credit card agreements with fewer pages, fearing it would put them at a higher risk for lawsuits. A prototype credit card agreement was released by The Consumer Financial Protection Bureau to the American Bankers Association. The association’s chief counsel, Kenneth Clayton, said while the association supports the bureau’s goal, he felt the credit card agreement prototype raises liability concerns that could be improved and made even shorter.
The Consumer Financial Protection Bureau will allow the general public to view the prototype agreement and offer their opinion as well. Most banks use an average of 5,000 words in their credit card agreement, and the prototype uses just 1,100.