Testing of CFPB prototype credit card agreement to begin this fall


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Last December, when the CFPB issued its prototype credit card agreement, the CFPB announced that Pentagon Federal Credit Union had signed up to test the prototype with its customers.

According to a notice published yesterday by the CFPB in the Federal Register, Pentagon is launching a testing program this fall of a “short-form credit card agreement” which it will be sending to new cardholders in the fourth quarter of 2012 and the first quarter of 2013. The notice states that the CFPB is requesting emergency approval from the Office of Management and Budget of the phone surveys it plans to take of Pentagon customers who receive the short-form agreement. Because the survey “includes questions that ask a consumer to recall their impressions of the cardholder agreement,” the CFPB believes it must administer the survey soon after a customer receives the agreement “when those impressions remain fresh.” It asserts in the notice that emergency approval by OMB is needed because the normal clearance process would disrupt the survey.

The CFPB says the survey “is designed to result in recommendations for development of and revisions to the Bureau’s approach to improving the readability of credit card agreements.” It also says the survey “will provide illustrative qualitative information only” and results “will not be used to make statistically-valid assessments for the purposes of extrapolating to the broader US population.”

We do not know how closely Pentagon’s short-form agreement will resemble the CFPB’s prototype “two-page” agreement. The CFPB’s prototype 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 remain concerned about the various problems we saw with the prototype, particularly the enforceability concerns raised by the CFPB’s incorporation-by-reference approach.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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