The Consumer Financial Protection Bureau (CFPB) is soliciting comments on subprime credit cards and the overall status of the consumer credit card market pursuant to its biennial review under the CARD Act. You are given until June 8, 2017, to submit any comments that will be considered in the CFPB’s review of products, practices, and trends affecting credit card consumers.
Status on Subprime Credit Cards
Certain subprime specialist issuers and their practices and metrics in providing credit cards to consumers with low credit scores were included in the CFPB’s previous review. The Bureau found that these products were offered at high costs and that these subprime specialist issuers relied on fees more than finance charges unlike mass market issuers.
For its current review, the Bureau wants to know the difference in the use of subprime credit cards and mass market credit cards among consumers with similar credit profiles. It’s also interested to receive feedback on how subprime borrowers have been faring in the credit card market.
Other main topics of interest where the CFPB would like to draw comments on are:
- Innovations. How far along have EMV standards, mobile payments and new consumer lending models have affected today’s credit card consumers? Are there any other innovations that would affect consumers and in what way?
- Paperless servicing. As more consumers are going paperless, i.e. enrolling in online and mobile account servicing for their credit cards, they may have missed important disclosures that could help them manage their credit cards. The Bureau wants to know of any benefits or risks this shift to digital servicing poses for consumers.
- Use of third-party sites. There are sites dedicated to comparing different credit cards for consumers and earn revenues from the sale of such products. It’s interesting to know if consumers are aware of the risks and benefits of going to these third-party comparison sites. Are their practices in any way deceptive, abusive or unfair to consumers? And are there areas where the use of these sites can be improved on? Get the latest on personal financing.
- Credit card collection. The Bureau previously reviewed the practices employed by issuers in collecting payments from credit card holders. Now it wants to know if there have been any changes to such practices and related market metrics.
- Variable interest rates. Most credit cards are tied to a floating interest rate. Are consumers aware that these rates are bound to go up when the market rates rise? What steps have credit card issuers taken to inform their customers about rate increases? What practices should issuers adopt to help consumers understand how rising rates will affect their credit card use?
- Rewards. They’re popular, prevalent and can be valuable to consumers, the Bureau found. In its prior review, it identified certain areas concerning the impact of this rewards system to the use of credit among consumers in its previous review. Are there any other risks the use of reward programs has on consumers? What can be done to address such risks?
- Credit card issuer terms and practices. Since the Bureau’s review last 2015, what notable changes have taken place in how issuers underwrite and issue credit cards? Are there any substantive changes in how they draft their credit card agreements, e.g. if they’ve become lengthier or more complex to understand. Learn more about credit cards and other loans here.
- Credit card rates disclosure. How effective are the disclosures made by issuers in informing customers about the cost of the credit card? How can they be further improved on?
- Credit card availability, risk-based pricing and product innovations. Relatedly, are there any changes to the cost and availability of credit cards, including for subprime borrowers, the use of risk-based pricing, innovations since the Bureau made its review?
- Deferred interest cards. Despite their popularity among consumers, the Bureau found that deferred interest products could be risky to consumers. It wants to know of any risks remaining in the use of such products and what can be done to address such.
- Secured cards. How are secured credit cards faring in today’s market? Are there any obstacles that prevent consumers from obtaining such and what are risks that they should know of?
- Consumer protections. The Bureau wants to know of any unfair or deceptive acts concerning credit cards and how they can be addressed.
Public comments on topics relevant to the credit card industry, other than those mentioned above, are also welcome.