Magazine article American Banker

Fed Proposes Stronger Card Solicitation Rules

Magazine article American Banker

Fed Proposes Stronger Card Solicitation Rules

Article excerpt

The Federal Reserve Board proposed stronger disclosure requirements on credit card solicitations Thursday. Amending the Fed's Reg Z, which implements the Truth in Lending Act, the plan would dictate the type size and placement of certain information -- primarily the annual interest rate and fees -- in all credit card solicitations and applications. Currently, all credit card solicitations must include a "Schumer box," which details interest rates, annual fees, and grace periods. Sen. Charles E. Schumer, D-N.Y., for whom the box is named, won the requirement as part of the Fair Credit and Charge Card Disclosure Act of 1989. But the Fed never issued a rule specifying how the information must be presented. For instance, while the law requires that the box be "clear and conspicuous" and "prominently located," many card issuers print it in extremely small type, and often place it on the reverse side of an application, or on a separate sheet of paper. Sen. Schumer pressured the Fed to address the practice in a series of meetings with Chairman Alan Greenspan, Governor Edward M. Gramlich, and General Counsel J. Virgil Mattingly Jr. in February and March. The Fed's proposed rule concedes that "changes to the current regulatory scheme appear necessary to ensure that consumers receive meaningful disclosures." In a press release Thursday Sen. Schumer praised the Fed's proposal. Many card issuers make it very easy to spot the low introductory "teaser" rate, he said. "But even Sherlock Holmes would need a magnifying glass to find the long-term interest rate in the fine print, and that violates the spirit of the Truth in Lending Act," he said. Industry representatives argued that new rules were not needed. "The information is there," said Jeff Unkle, first vice president of First USA Inc. "The regulations are quite specific about what you have to disclose. …

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