CUNA and NAFCU both praised the efforts of the Consumer Financial Protection Bureau to simplify credit card disclosures, but made suggestions that might have the effect of making the form longer.
Mary Mitchell Dunn, CUNA senior vice president and deputy general counsel, wrote that the CFPB’s form, which is currently being tested by Pentagon FCU and is approximately 1,100 words, compared with the average form which is 5,000 words, “is a very positive step forward.’’
Carrie Hunt, NAFCU vice president and general counsel, wrote that while “additional clarification may be required to account for uncommon situations, the agency’s form discloses the most important information in a simple, straightforward manner.’’
Both groups zeroed in on the statement on the form that some fees and other terms can be “changed for any reason.’’
Dunn recommended that that the bureau provide additional clarification to make it clearer and more accurate to consumers.
Hunt wrote that while the disclosure is accurate, it shows the “structural and legal impediments to successfully streamlining disclosures.”
She added that the length of credit card agreements is “a natural consequence of full and fair disclosure generally and also the specific legal issues that credit card issuers experienced in the past.’’
On other issues, Dunn suggested that the CFPB further define what it refers to when it says “penalty,’’ or “penalty interest rate”. She also recommended that the bureau change the form so that balance transfer and cash advance fees are listed in dollars instead of percentages.
In addition, she wrote that the form would be improved by including a definition of the phrase “daily balance method with compounding,’’ and by telling consumers where they can obtain a copy of the privacy notice referred to on the form.
Hunt also recommended the CFPB clarify a section of the disclosure form so that consumers understand that in some instances there is little or no notice required for certain kinds of interest rate changes.
The Truth In Lending Act states: “Changes that do not require advance notice include: Rate increases due to the completion of, or failure of a consumer to comply with, the terms of a workout or temporary hardship arrangement, if those terms are disclosed prior to commencement of the arrangement.’’
CFPB’s simplified credit card disclosure form is part of its broader effort aimed at increasing consumer knowledge of financial subjects before they take on additional debt. Its program is called Know before You Owe.