```

[Federal Register Volume 77, Number 245 (Thursday, December 20, 2012)]
[Notices]
[Pages 75410-75412]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-30609]

=======================================================================
-----------------------------------------------------------------------

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.

-----------------------------------------------------------------------

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 wei.zhang@cfpb.gov.

    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.
---------------------------------------------------------------------------

    \1\ See 15 U.S.C. 1616(a).
    \2\ See 15 U.S.C. 1616(b).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \6\ CARD Act Sec.  101; see also 12 CFR 1026.9(c) and 55.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \7\ CARD Act Sec.  102(b); see also 12 CFR 1026.52(b).
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \8\ CARD Act Sec.  102(a); see also 12 CFR 1026.56.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \10\ CARD Act Sec.  104; see also 12 CFR 1026.53.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \11\ 12 CFR 1026.7(b).
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \12\ CARD Act Sec.  109; see also 12 CFR 1026.51(a).
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

    \13\ CARD Act Sec. Sec.  301, 303, 304; see also 12 CFR 
1026.51(b), 57.
---------------------------------------------------------------------------

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?

[[Page 75412]]

(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
```