WASHINGTON — During last week's meeting, the Federal Reserve Board issued a proposal intended to improve the disclosures provided to consumers with credit cards and other revolving credit plans.
"The goal of the proposed revisions is to make sure that consumers get key information about credit card terms in a clear and conspicuous format and at a time when it would be most useful to them," Federal Reserve Board Chairman Ben S. Bernanke commented. "Greater clarity in credit disclosures allows consumers to make more-informed credit decisions and enhances competition among credit card issuers."
Reg Z disclosures have undergone more than two years of public comment through advance notices and consumer testing. The proposed amendments principally focus on the rules for open-end credit accounts that are not home secured, mainly general purpose and retail credit card plans. The proposal would require changes to the format, timing, and content requirements for credit card applications and solicitations and for the disclosures that consumers receive throughout the life of an open-end account, including account-opening and periodic statements.
Recommended For You
"Although we have used consumer focus groups in the past to study the effectiveness of consumer disclosures, the proposed changes are based on one-on-one consumer interviews to assess consumer understanding and use of disclosures," Federal Reserve Board Governor Randall S. Kroszner said. "This testing helped us to identify the key information consumers need to make informed choices about how they use their accounts."
Under the proposal, credit card application and solicitation disclosures would highlight fees and the reasons penalty rates might be applied, such as late payment. Creditors would be required to summarize key terms at account opening and when terms are changed. Periodic statements would break out costs for interest and fees. Two alternatives are proposed regarding the "effective" or "historical" annual percentage rate disclosed on periodic statements. The proposal would also expand the circumstances under which consumers receive written notice of changes in the terms applicable to their accounts, including requiring an advance notice before a penalty is required, and increase the amount of time these notices must be sent before the change becomes effective.
The public comment period ends 120 days after publication of the proposal in the Federal Register, which is expected shortly.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
