CardHub.Com Study of Credit Card Disclosures: “Federal Reserve has set an embarrassingly low bar for issuer disclosures”

Here.  Here is the key finding section of the report:

• The Federal Reserve has set an embarrassingly low bar for issuer disclosures, as evidenced by the 7.5% score its model disclosure received in this study.

• The Consumer Financial Protection Bureau obviously recognized the inherent flaws with the Federal Reserve’s implemented guidelines for credit card disclosures and created its own proposal, which received a score of 85% and is open for public comment.

• While the CARD Act successfully improved transparency and consumer rights throughout the credit card industry, regulatory guidance directs issuers not to disclose some of the most important changes, including the following:
  • Interest rate increases of any kind are prohibited during the first year an account is open unless a promotional rate concludes (must be in place for at least six months), the cardholder is at least 60 days delinquent, a variable rate’s index changes, or there is a workout agreement in place.
  • Rate increases may never be applied to existing balances unless a cardholder is at least 60 days delinquent, a variable rate’s index changes, or there is a workout agreement in place.
  • Issuers are required by law to remove a Penalty APR from an existing balance if a cardholder makes on-time payments for the next six months following a rate increase.

• As one would expect, all of the major credit card issuers use disclosures that are at least on par with the Fed’s model.  Two issuers – namely American Express and Bank of America – provide additional information on top of what regulators recommend in order to further consumer understanding.

• 70% of major credit card issuers use Penalty APRs.

• USAA, U.S. Bank, and Wells Fargo are the only major issuers that do not use Penalty APRs at all.  Bank of America also deserves credit, as it explicitly states that it only applies Penalty APRs to new transactions.