CFPB Should Take Tougher Stance against Credit Cards, Consumer Groups Say
Byline: Rachel Witkowski
WASHINGTON -- Consumer advocates pressed the Consumer Financial Protection Bureau on Wednesday to crack down harder on credit card issuers despite recent regulations that largely curtailed hidden fees and predatory practices.
During a field hearing in Chicago following the CFPB's study on the impact of card regulations over the last four years, consumer advocates urged the CFPB to dig further into legal disclosures of credit cards, not just unexpected rate hikes and fees.
Credit card issuers have "terms that are not directly related to fees or pricing but do have an impact on consumers everywhere such as: what are the dispute resolution mechanisms, is there binding or forced arbitration, what choice of law applies to those circumstances, what exactly is the contour of a unilateral modification provision," said Theresa Amato, executive director of Citizen Works, who attended the hearing. "For example, can they just change the terms at any time? And how, and to what extent and why, do we have these kinds of provisions in these agreements that people can't find them easily?"
CFPB Director Richard Cordray said in his opening remarks that the agency was going to look into a handful of card problems that were not entirely addressed through the Credit Card Accountability Responsibility and Disclosure Act of 2009. That included cracking down on issuers that push consumers into add-on products like identity theft protection; fees charged before an account is opened; 0% teaser rates for a certain period of time; and disclosures of online statements, rewards programs and grace periods.
"Although the CARD Act effectively addressed many problematic practices in the market, we do highlight a number of outstanding concerns in our report," said Cordray at the hearing. "We will be examining the risks and benefits of such products and will take action if it appears to be justified."
Some Industry advocates who did not participate in the hearing immediately issued statements cautioning the CFPB about aggressively limiting credit card products through further rulemaking.
"Any new rules will have tremendous unwanted impact on credit unions and their 96 million members, and will make credit union credit card operations unnecessarily more strenuous and costly for both credit unions and their members," said Dan Berger, the president and chief executive of the National Association of Federal Credit Unions, in a letter to the CFPB Wednesday.
The American Bankers Association's chief counsel, Kenneth Clayton, also issued a statement saying while the CARD Act "provided significant benefits" it also created "unintended consequences that have raised contract interest rates and reduced access to credit. …