WASHINGTON (12/8/11)--The Consumer Financial Protection Bureau (CFPB) has begun another stage of its Know Before You Owe project, announcing on Wednesday that its sample credit card disclosures.
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A two-page disclosure that "contains the key terms consumers need, clearly laid out and without fine print" has been released to the public, and the CFPB said its initiative will simplify contracts to help consumers better understand their credit cards while allowing card issuers to retain their freedom to design credit card products.
The sample form divides credit card information into three sections: Costs, Changes and Additional Information.
The Costs section lays out interest rates and related charges tied to purchases, balance transfers, and cash advances, and provides information on returned payment fees, replacement card fees, rush card fees, and foreign currency transaction fees. Payment deadlines and possible late payment issues are also explained on the form.
The form also addresses changes that could be applied to the credit card account, including penalty interest rates and other interest rate changes, credit limit changes, fees, and other terms.
Cardholder and card issuer rights are explained in the Additional Information section. Consumer privacy rights and other terms of the credit card agreement are also addressed.
The CFPB has launched a testing program with one credit card issuer, and has also released the sample form for public comment. The CFPB said it ultimately would not set the terms of card products, and credit card issuers will "have total control of terms within the limits of existing law."
The new credit card project was announced at a Wednesday meeting in Cleveland, Ohio. The Ohio Credit Union League and 10 representatives from five Ohio-based credit unions attended the announcement, and gave their opinions on the new disclosure during a roundtable discussion with the CFPB. The credit union representatives also covered financial education and general credit union issues during the meeting.
The Credit Union National Association will be reviewing the sample form with its Consumer Protection Subcommittee and Lending Council and providing feedback to the CFPB later this month.
In a separate blog post, the CFPB advised credit card shoppers on how to proceed as they decide which credit card they should use.
Credit card shoppers should first determine how they are going to use their new card, and whether or not they will pay the card off every month or maintain a balance on their credit card. Card customers should also know which terms to compare when evaluating credit card offers. The CFPB suggested that they focus on annual percentage rates (APR), APR for balance transfers, penalty APRs, and fees attached to the credit card account.
The CFPB said that credit unions or other financial institutions with which the consumer already has an account may offer the best credit card terms, but added that consumers should not hesitate to compare mailed or online offers with offers from their current financial institutions. Credit card shoppers can also ask their current financial institutions to match the terms of any credit card offer, the CFPB said.
For more on the CFPB's credit card work, use the resource links.