[author: Barbara S. Mishkin]

Last December, the CFPB issued a prototype credit card agreement consisting of a “two-page” agreement that incorporated by reference definitions set forth on a separate four-page document that the consumer would either have to access on the internet or request from the card issuer. We wrote about various problems we saw with the prototype, particularly the enforceability concerns raised by the CFPB’s incorporation-by-reference approach. 

When it issued the prototype, the CFPB announced that Pentagon Federal Credit Union had signed up to test the prototype with its customers. Last week, in his testimony before the Senate Banking Committee, CFPB Director Cordray stated that the prototype “is now being piloted” at Pentagon. That statement surprised us, since it had been rumored that the pilot program never got off the ground due to Pentagon’s own concerns about the incorporation-by-reference approach. Also, none of the forms of credit card agreement posted on Pentagon’s website that we saw use the CFPB’s prototype. We assume the CFPB will be providing further information on the status of the pilot program.