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[Federal Register Volume 80, Number 53 (Thursday, March 19, 2015)]
[Notices]
[Pages 14365-14366]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06351]

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BUREAU OF CONSUMER FINANCIAL PROTECTION

[Docket No. CFPB-2015-0007]

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 or CFPB) 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, 
described further below.

DATES: Comments must be submitted on or before May 18, 2015 to be 
assured of consideration.

ADDRESSES: You may submit responsive information and other comments, 
identified by the document title and Docket No. CFPB-2015-0007, by any 
of the following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include the 
document title and Docket No. CFPB-2015-0007 in the subject line of the 
message.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.
    Instructions: All submissions should include the agency name and 
docket number for this proposal. Because paper mail in the Washington, 
DC area and at the Bureau is subject to delay, commenters are 
encouraged to submit comments electronically. In general, all comments 
received will be posted without change to http://www.regulations.gov. 
In addition, comments will be available for public inspection and 
copying at 1275 First Street NE., Washington, DC 20002, 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 comments, 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. Comments generally will not 
be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: For general inquiries, submission 
process questions, or any additional information, please contact Wei 
Zhang, Division of Research, Markets and Regulations, Consumer 
Financial Protection Bureau, at (202) 435-7700, or [email protected].

SUPPLEMENTARY INFORMATION: 
    Section 502(a) of the CARD Act \1\ requires the Bureau to conduct a 
review, within the limits of its existing resources available for 
reporting purposes, of the consumer credit card market every two years. 
To inform that review, Section 502(b) \2\ instructs the Bureau to seek 
public comment.
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    \1\ See 15 U.S.C. 1616(a).
    \2\ See 15 U.S.C. 1616(b).
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    The Bureau's first such review was published in October, 2013.\3\ 
To inform the Bureau's next review, 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 a review of the credit card market, including the impact 
of the CARD Act on that market.
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    \3\ CARD Act Report, available at, http://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf.
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1. Background: The CARD Act

    The CARD Act was signed into law in May 2009.\4\ Passage of the Act 
was expressly intended to ``establish fair and transparent practices 
related to the extension of credit'' in the credit card market.\5\ To 
achieve these agreed-upon purposes, the Act changed the requirements 
applicable to credit card pricing in a number of significant respects 
including direct limits on a number of pricing practices that Congress 
deemed unfair or unclear to consumers. A high-level summary of CARD Act 
changes, along with further information about the CARD Act is available 
on the Bureau's Web site at www.consumerfinance.gov/credit-cards.
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    \4\ The CARD Act's provisions took effect in three stages: 
August 2009, February 2010, and October 2011.
    \5\ Public Law 111-24, 123 Stat. 1734 (2009).
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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. The Bureau seeks comments in three primary areas. Firstly, 
the Bureau seeks comments on the continuing impact of the CARD Act on 
the credit card market, including but not limited to those questions 
explicitly outlined in Section 502(a) and in (a) through (d) below. 
Secondly, the Bureau seeks comments on six areas of further interest as 
previously outlined in the previous Review, published October 2013, 
delineated in (e) through (j) below. Thirdly, the Bureau has since 
identified additional specific areas of interest on which it 
specifically seeks comment, outlined in (k) through (l).
    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 the Bureau's review of the credit card 
market, so this list of subjects should not be viewed as exhaustive. 
Commenters are encouraged to address any other areas of interest or 
concern to them.
    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 or the length and complexity of such agreements changed over 
the past two years? How have issuers changed their pricing, marketing, 
underwriting, or other practices?

[[Page 14366]]

(b) The Effectiveness of Disclosure of Terms, Fees, and Other Expenses 
of Credit Card Plans

    How effective are current disclosures of rates, fees, and other 
cost terms of credit card accounts in conveying to consumers the costs 
of credit card plans? 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 or Unlawful Discrimination Relating to Credit Card Plans

    Do unfair, deceptive, or abusive acts and practices, or unlawful 
discrimination, still exist in the credit card market, and if so, in 
what form and with what frequency and effect? How might such conduct be 
prevented and at what cost?

(d) Whether implementation of the CARD Act has affected (i) the cost 
and availability of credit, particularly with respect to non-prime 
borrowers; (ii) the use of risk-based pricing; or (iii) credit card 
product innovation?

    What additional evidence exists since the publication of the 
Bureau's prior report with respect to the impact of the CARD Act on the 
factors listed above? Has the impact of the CARD Act on these factors 
changed over the past two years?

(e) Online Disclosures

    Certain disclosures, including disclosures mandated by the CARD 
Act, are provided to consumers through their periodic billing 
statements. However, the Bureau's prior study found that most consumers 
who make on-line payments do not access their monthly statement and 
instead use online portals which do not contain these disclosures. This 
reflects a more general challenge of translating regulations related to 
disclosures largely written for a paper-and-pencil world into the 
modern electronic world. How do card issuers ensure that consumers 
using different channels, including mobile, receive effective 
disclosures both at the point of application and in managing existing 
accounts?

(f) Rewards Products

    The Bureau's prior study observed that rewards play an important 
part in consumers' decisions to apply for a card but that consumer 
awareness of rewards terms appears to be declining. Rewards offers can 
be highly complex, with detailed rules regarding the eligibility for 
sign-on bonuses, the value of earned points, the rate at which they are 
earned, and the rules governing their forfeiture. Are rewards 
disclosures being made in a clear and transparent manner? Do consumers 
understand these offers in applying for rewards cards? What further 
improvements in disclosure would benefit consumer cardholders at this 
point, and what costs would be incurred in providing such disclosures?

(g) Grace Periods

    The Bureau's prior study observed that for consumers, who do not 
pay their balance in full each month, a key determinant of their cost 
of credit is the grace period and that disclosing the complex rules 
governing the availability of a grace period is quite challenging. Are 
grace period limitations being disclosed in a clear and transparent 
manner? Do consumers understand the limitations? What further 
improvements in disclosure would benefit consumer cardholders at this 
point, and what costs would be incurred in providing such disclosures?

(h) Add-On Products

    Credit card issuers market or have marketed various ``add-on'' 
products to card users, including debt protection, identity theft 
protection, credit score monitoring, and other products that are 
supplementary to the actual extension of credit. The Bureau has found 
through its supervisory and enforcement work that these products are 
frequently sold in a manner that is unfair, abusive, or deceptive. To 
what extent are card issuers continuing to market or permit third 
parties to market add-on products? What actions have issuers taken to 
prevent unfair, abusive, or deceptive marketing practices? What harmful 
practices persist regarding add-on products?

(i) Fee Harvester Cards

    Some card issuers charge upfront fees that exceed 25% of a card's 
initial credit limit, but those practices have been held not to be 
covered by the CARD Act because a portion of the fees are paid prior to 
account opening. What is the prevalence and magnitude of application 
fees or other fee harvesting practices in connection with account 
opening?

(j) Deferred Interest Products

    The Bureau's prior report found that deferred interest products--
purchases which retroactively assess and charge interest if the balance 
is not paid in full by a specific date--can end up costing a 
significant segment of vulnerable consumers sizable amount of money and 
that it is unclear whether those consumers understand the risks 
entailed or how they are affected when they are retroactively assessed 
interest. At the same time, the Bureau found that even among subprime 
consumers, a majority of consumers do obtain interest-free financing 
through deferred interest programs and that it is unclear what 
alternatives are available to these consumers. Do consumers who use 
deferred interest promotions understand the risk of being charged 
retroactive interest? What is the impact on consumers who are assessed 
such retroactive interest? What alternatives are available to these 
consumers?

(k) Debt Collection

    The collection of past due amounts on credit accounts is an 
important part of any credit system but also an area fraught with risks 
to consumers. The Bureau seeks to better understand debt collection 
practices within the credit card industry. What practices are used to 
minimize losses from delinquent customers prior to chargeoff and with 
what results? What practices are used to secure recoveries post charge 
off and with what results? To what extent do card issuers use third-
party contingency collection agencies for collections of accounts and 
how are such relationships managed? To what extend do card issuers sell 
charged off accounts to debt buyers and on what terms and with what 
restrictions?

(l) Ability To Pay

    The CARD Act requires issuers to assess a consumer's ability to pay 
before opening a credit card account or increasing a credit line. The 
Bureau seeks to better understand how ``ability to pay'' standards are 
being implemented in determining whether to approve an application, the 
amount of credit to extend initially, and whether to increase a credit 
line. How are card issuers determining whether applicants for a credit 
card have sufficient income or assets to cover an extension of new 
credit? How are card issuers making that determination in connection 
with the consideration of credit line increases? How do these standards 
and practices affect consumer access to credit and consumer outcomes 
with credit card products?

    Authority:  15 U.S.C. 1616(a), (b).

    Dated: March 16, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-06351 Filed 3-18-15; 8:45 am]
 BILLING CODE 4810-AM-P
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