When it gained full regulatory power over the financial services industry last year, the federal agency tasked with protecting consumers from predatory or misleading lending practices has as its primary goal the creation of simpler lending agreements that were easier to understand.
However, in the intervening months, there has been little in the way of action toward that goal. Now, though, one of the federal Consumer Financial Protection Bureau’s top officials says that the need for a uniform, simplified lending disclosure for credit card agreements is still very much on the agency’s mind, according to a report from Dow Jones Newswires.
Speaking at a conference for the payments industry, Marla Blow, assistant director of card markets for the CFPB, stated that it’s her belief that consumers should be able to easily read and understand the terms of any lending agreement into which they enter, and that a document should be created by the agency to make that possible, the report said. The goal for such a document is that it would be more legible and understandable, while still providing legal protections and making sure the issuing industry’s concerns for disclosure forms are addressed.
Already, there has been some worry voiced by lenders that the CFPB’s trial document — currently being tested for credit card applications to the Pentagon Federal Credit Union — does not include crucial legal language that spells out the legal responsibilities between lender and consumer, the report said. The concern is that this could lead to a larger number of lawsuits over balance disputes. Currently, these complaints are the most frequently lodged by consumers with the federal agency.
However, the CFPB says that these billing disputes are largely the result of consumers not having a full understanding of their lending agreement, and that simplified disclosure forms will help them to avoid these issues in the future, the report said. Consumers also frequently complain about the interest rates on the cards they acquire, and this, too, would be included and explained in the CFPB’s ideal disclosure document.
[Credit Cards: Research and compare credit cards at Credit.com.]
The CFPB has had full regulatory power since last July, but only gained its top executive earlier this year. Since that point, however, it has been far more aggressive in rolling out consumer protections for a number of financial accounts.