CFPB Plans Continued Scrutiny of Credit Card Practices

by Ballard Spahr LLP

The Consumer Financial Protection Bureau has issued a report on how the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) has affected the consumer credit card market. The report describes the CFPB’s findings based on the first of the biennial market reviews that the CFPB must perform under the CARD Act. Most notably, the report also describes the CFPB’s plans to scrutinize add-on products, rewards programs, and other “areas of concern.”

The CFPB’s findings include:

  • The CARD Act has effectively eliminated overlimit fees, sharply curtailed repricing practices, and reduced the average size of late fees. The total cost of credit (all fees, interest, and finance charges) declined by two percentage points between 2008 and 2012 despite an increase in annual fees and interest rates. However, the CFPB was unable to determine the extent to which this decline was attributable to the CARD Act, rather than other factors such as the fall in delinquencies from their 2008 highs.
  • The CARD Act has noticeably affected credit availability in three ways: substantially decreasing the number of credit card accounts originated among students and other consumers under the age of 21; causing a small but discernable percentage of otherwise creditworthy applicants to be declined due to insufficient income to satisfy the Act’s ability-to-pay requirement; and reducing the percentage of consumers receiving unsolicited credit line increases.
  • Credit cards also are generally less available now than in 2007. This is particularly true in the subprime and deep subprime sectors, which each saw declines exceeding 60 percent in used credit lines from the second quarter of 2008 to the fourth quarter of 2012. The CFPB emphasizes, however, that “nothing in the evidence reviewed suggested that the CARD Act was responsible for the reduction in credit access” or “that the CARD Act has retarded the pace of recovery.” The CFPB points to $1.9 trillion in total unused credit for cardholders (which includes $38.6 billion of subprime credit) as evidence that “responsible access to credit remains available.”
  • The readability and accessibility of cardholder agreements has generally improved since 2008.

The report highlights the following “areas of concern” that “may pose risk to consumers and that will warrant further scrutiny by the Bureau”:

  • Marketing and sales practices of card issuers and their service providers relating to add-on products, such as debt protection, identity theft protection, and credit score monitoring.
  • “Fee harvesting” in the form of application and other fees charged before account opening. Although such fees are not counted toward the CARD Act’s limit on first-year fees (which cannot exceed 25 percent of the consumer’s credit limit), the CFPB nevertheless intends to monitor such fees “to determine if it should take action” under its UDAAP authority.
  • Deferred interest products, with the CFPB finding it is “unclear whether [vulnerable] consumers appreciate the high interest rate risk that might occur at the end of the promotional period.”
  • Rewards program disclosures and practices. The CFPB questioned whether specific actions required to earn rewards and formulas for computing rewards are adequately disclosed and raised concerns about the complexity of program terms involving the value of reward points and redemption and forfeiture rules. The CFPB also identified disclosure concerns involving how required disclosures can be translated into an online payment screen, as well as the adequacy of grace period disclosures.

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.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.