CCH Financial Reform News Center

Fed Puts Limits on Credit Card Penalty Fees

By Richard Roth, J.D., Editor, the CCH Federal Banking Law Reporter, CCH Bank Compliance Guide and Bank Digest.

The Federal Reserve Board has adopted final rules that will put limits on credit card penalty fees and require periodic reviews of interest rate increases. This latest action is the third stage of the Fed’s implementation of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act), which was enacted in May 2009.

Fed Submits Reports to Congress Required by Credit CARD Act

This story appeared in Bank Digest.

The Federal Reserve Board has submitted two reports to Congress required by the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) of 2009. The Report to the Congress on Reductions of Consumer Credit Limits Based on Certain Information as to Experience or Transactions of the Consumer examines the practices of credit card issuers regarding the types of information some creditors may consider when setting and adjusting credit terms on credit cards they issue to consumers. The Report to the Congress on the Use of Credit Cards by Small Businesses and the Credit Card Market for Small Businesses reviews the use of credit cards by businesses with no more than 50 employees and of the credit card market for small businesses.

Credit CARD Act Report Examines Financial Literacy and English Proficiency

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digestand Individual Retirement Plans Guide.

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 mandated the Government Accountability Office (GAO) to examine the relationship between fluency in the English language and financial literacy. According to Census data, more than 12 million adults in the United States report they do not speak English well or at all. Proficiency in reading, writing, speaking and understanding the English language appears to be linked to multiple dimensions of adult life in the United States, including financial literacy—the ability to make informed judgments and take effective actions regarding the current and future use and management of money.

The GAO study found that a lack of proficiency in English can create significant barriers to financial literacy and to conducting everyday financial affairs. For example, service providers and consumers with limited English proficiency stated that because most financial documents are available only in English, individuals with limited English proficiency can face challenges completing account applications, understanding contracts and resolving problems, such as erroneous bills. In addition, financial education materials—such as print material, websites, broadcast media and classroom curricula—are not always available in languages other than English and, in some cases, Spanish. Further, information and documents related to financial products tend to be very complex and can use language confusing even to native English speakers. In some cases, written financial materials are provided in other languages, but the translation may not be clear if it is not written using colloquial or culturally appropriate language. Oral translation can also be of limited usefulness if the interpreter does not fully understand or is not able to explain the material, a problem exacerbated by the fact that adults with limited English proficiency often receive assistance from their minor children.

Fed Announces Online Database for Consumer Credit Card Agreements

This story appeared in Bank Digest.

The Federal Reserve Board has announced the creation of a searchable database for consumer credit card agreements. The database currently contains agreements from more than 300 credit card issuers. The agreements contain general credit terms and conditions along with pricing and fee information. The database is expected to help consumers compare credit card agreements and find a card that best suits their personal finance needs. The database will be updated quarterly.

Debit Card Swipe Fees Targeted by Senate

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

By a vote of 64 to 33 the Senate approved an amendment to financial reform legislation that seeks to reform swipe fees on debit cards while addressing the rules and regulations associated with accepting debit and credit cards.

Swipe fees, known as “interchange fees,” are a percentage of each transaction that the major credit card companies and their member banks collect from retailers every time a credit or debit card is used. According to estimates, $48 billion in swipe fees were charged in 2008.

Report Says Credit CARD Act Helps Borrowers Pay Down Debt Faster

This story appeared in Bank Digest.

Senate Banking Committee Chairman Sen. Chris Dodd, D-Conn., noted that a report released by the Center for Responsible Lending (CRL) showed that the Credit Card Accountability, Responsibility, and Disclosure Act(Credit CARD Act) will allow borrowers to pay down existing debt faster than under the old rules. According to the report, under the Credit CARD Act, borrowers can pay down existing credit card debt sooner by paying less interest than under the old rules, all the while improving their credit score. Under the law, any amount that customers pay above the required minimum must be applied to the balance in their credit card account carrying the highest interest rate. The CRL analysis estimates that for each dollar above the minimum that a customer pays, he or she may save two dollars in interest.

OTS Amending Credit Practices Rules

This story appeared in Bank Digest.

The Office of Thrift Supervision  is amending its regulations at 12 CFR part 535 titled “Prohibited Consumer Credit Practices” to avoid duplication and inconsistency with the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) and the rules adopted by the Federal Reserve Board implementing the Credit CARD Act. The amendments become effective July 1, 2010.

Advice Provided for Credit Card Debt Settlement

This story appeared in Bank Digest.

The FTC has issued a new publication, Settling Your Credit Card Debts, which provides red flags to watch out for from companies that promise to settle credit card debt, and discusses practical no-cost and low-cost options for help, including dealing with creditors directly and contacting a credit counselor. The FTC noted that there is no guarantee that debt settlement companies can persuade a credit card company to accept partial payment of a legitimate debt. Even if they can, clients must put aside money for their creditors each month and may have to pay hefty fees up front to the debt settlement company--putting them further in the hole before they get any relief.

Fed Issues Reminder of New Credit CARD Act Requirements

This story appeared in Bank Digest.

The Fed has sent a letter to its supervised institutions to reiterate and highlight Regulation Z (Truth in Lending) requirements related to the submission of consumer credit card agreements. Under the Credit Card Accountability Responsibility and Disclosure Act of 2009, credit card issuers must submit their consumer credit card agreements to the Fed for posting on the Fed's website. However, card issuers are not required to submit agreements for private label plans offered on behalf of a single merchant or a group of affiliated merchants if each of these plans has fewer than 10,000 open accounts. Also, issuers are not required to submit agreements for plans offered in order to test a new credit card product provided that the plan involves no more than 10,000 accounts. Agreements that are not currently offered to the public are also excepted from the rule.

Frank Statement on Banks' Response to Credit CARD Act

This story appeared in Bank Digest.

In a statement regarding implementation of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, House Financial Services Committee Chairman Barney Frank, D-Mass., commented on letters that credit card companies have been sending to their customers. “These letters indicate that Americans are now seeing the benefits of the CARD Act. It was unfortunately the case that some banks tried to game the system after we passed the bill into law, but their actions provide further evidence of our need for a Consumer Financial Protection Agency...Had the CFPA been in existence we could have moved right away to block the banks' egregious actions.”