CFPB Holds Card Act Hearing in Chicago

The Consumer Financial Protection Bureau (CFPB) held a public hearing in Chicago on October 2nd. CFPB Director Richard Cordray joined a panel of advocates and industry representatives at the Harold Washington Library to discuss findings from their report on the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). The CARD Act represents a large step forward in consumer protections and financial accountability.

According to the CFPB report, the CARD Act has had several beneficial effects for consumers over the last 3 years ago. The CFPB found that:

  • Total cost of credit declined by 2 percentage points.
  • Size of late fees declined by an average of $6 for each consumer.
  • Overlimit fees have been effectively eliminated. Consumers paid about $2.5 billion less in overlimit fees than they paid in 2008 because people now have to opt-in to these fees.
  • Consumers under the age of 21 are better protected from credit cards they cannot afford with the percent of young adults ages 18-20 that have at least one credit card cut in half.

Director Cordray also shared credit card issues that are still a concern to the CFPB. This includes:

  • Add-on products: Consumers are often misled by credit card companies into buying products such as debt cancellation, identity theft protection, and credit monitoring.
  • Fee harvester cards: Application fees or other fees charged before an account is opened do not count toward determining whether a card issuer is violating the CARD Act’s rules limiting fee harvester cards.
  • Disclosures: Online disclosures, disclosures concerning rewards products, and disclosures about grace periods are not covered under the CARD ACT. However they are often confusing for consumers. The CFPB intends to monitor these types of disclosures moving forward.

During the hearing, the CFPB also heard from community members sharing feedback about the use of credit in their communities.

Lucy Mullany, testifying on behalf of IABG, urged the CFPB to prohibit overdraft and credit on prepaid cards. “Consumers equipped to handle credit can access checking accounts, credit cards or other credit products. For those who cannot, prepaid cards must remain a safe product option.” Lucy also stressed that allowing credit features on prepaid cards will give payday lenders a way to avoid rate caps – effectively destroying state payday and usury laws and existing military lending protections.

Lucy was joined by our partner, Spencer Cowan – Vice President of Research at Woodstock Institute, who echoed the sentiments of the panel for increased restriction on add-on products and “fee-harvesting” cards and praised the CFPB for their work protecting low-income consumers.

This public hearing was just one way that the CFPB hears from consumers. The Bureau relies heavily on public comments and complaints to focus their attention on issues that matter to consumers most. You can submit complaints or comments to the CFPB through their website or by calling 855-411-2372.

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