Creditnet News Story
Credit card agreements growing easier to understand
Friday, January 27, 2012
By Linda McCarthy
Consumers who are thinking about obtaining new credit cards in the near future may be able to do so with a simpler lending agreement that more clearly spells out the terms of their new account.
In the near future, it's expected that many of the nation's top financial institutions will be introducing new lending agreements that make the terms of credit card accounts clearer for would-be borrowers, according to a report from the Columbus Dispatch. Some, led by JPMorgan Chase and Co., have already adopted similar documents for checking accounts.
The decision is likely being driven by the new federal Consumer Financial Protection Bureau's initiative to introduce its own simpler account disclosure documents in the near future, the report said. Already, the CFPB is testing a version of this document with the Pentagon Federal Credit Union, which has more than 1 million members, including about 350,000 credit cardholders.
The length of the CFPB document is about 1,100 words, down from the industry-wide average for a credit card agreement of more than 5,000, the report said. The CFPB made simplifying account disclosure documents a priority after a study found that about two-thirds of consumers were unsure how their cards worked and were confused by the agreement they signed.
The CFPB has also worked diligently since it gained full regulatory power over the lending industry in July to build a database of all the credit card offers available to consumers nationwide. This is done so that Americans can more easily compare accounts they might like to open. It also plans to introduce simplified lending agreements for other types of consumer credit, including mortgages, in the near future.
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