CFPB Director Richard Cordray said at a field hearing on the 2009 Credit CARD Act held on Wednesday that while the legislation addressed many issues within the market, the agency still has a number of concerns.
According to the report released by the CFPB, the CARD Act reduced the average size of credit card late fees by approximately $6, a total of $1.5 billion in savings to consumers. The report also showed that over-limit fees have virtually disappeared, and that the total cost of credit has declined by two percent.
Cordray said the agency still has concerns regarding credit card add-on products. Earlier this year, the agency put issuers on notice and brought several enforcement actions against firms found to have engaged in unfair or deceptive practices.
He also pointed to upfront fees charged by some credit card issuers that exceed the 25 percent of the initial credit limit cap set by the CARD Act, saying the practice will not be covered under the law because a portion of the fees are paid before the account is opened.
“We plan to keep a close eye on how card issuers use application fees in connection with opening accounts, and we will determine if we should take action under our available authorities,” Cordray said.
Additionally, Cordray said the agency planned to study the consumer impact of deferred interest products—credit cards that carry a zero-percent interest rate, but if the balance is not paid in full by a certain date, the issuer will charge interest retroactively.
The CFPB also identified a number of transparency issues, including those related to online disclosures. The CARD Act requires certain disclosures to be included on monthly statements, but consumers who pay bills online may not see the disclosures.
Cordray said the agency would focus on improving disclosures, reviewing whether reward disclosures are adequate and transparent and whether consumers understand the terms of their credit card agreements.
“Our CARD Act report was a comprehensive undertaking which showed that, on the whole, the CARD Act accomplished a number of its intended goals,” Cordray said. “Based on the information we have available to review changes in the credit card market, the Act eliminated many unfair fees, made some market practices more transparent, paved the way for easier comparison shopping, and created a market where consumers can see the costs upfront. These changes are critical to strengthening consumer protections in the marketplace and helping us rebuild our economy.”