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Simplified credit card agreement debuts

The Consumer Financial Protection Bureau is testing a form that explains in plain language what customers are signing up for.

By MSN Money Partner Dec 8, 2011 3:02PM

This post comes from Jeanine Skowronski at partner site MainStreet.


MainStreet on MSN MoneyThe Consumer Financial Protection Bureau has debuted a new prototype for credit card agreements. The two-page form is intended to simplify credit card contracts so prices, risks and terms are easier for consumers to understand.


The agreement follows the CFPB’s release of a report on credit card complaints, which revealed that consumer confusion still persists when it comes to the terms and conditions of their credit card contracts and associated products like debt protection services.


The prototype agreement separates information about prices, risks and terms and is devoid of the legalese issuers typically weave into the agreement. It is organized into three simple sections: costs, changes and additional information. Click here to see a copy of the new form on the CFPB's website.


To help streamline the form, the CFPB is also introducing formal definitions for terms commonly found in credit card contracts, including "APR," "balance transfer" and even "card" itself. This precludes issuers from having to include unnecessarily long clauses or qualifiers for legal purposes at the expense of confusing consumers. The definitions will be available to consumers online and in print versions.


The form is the second prototype the CFPB is testing as part of its "Know Before You Owe" initiative. Back in May, the bureau unveiled two sample documents that could replace existing federally required mortgage disclosure forms. Post continues below.

The CFPB plans to test the credit card form with Pentagon Federal Credit Union to get consumer feedback, and it is also asking the public to weigh in on the prototype agreement on its website.


The prototype clearly addresses the most common complaints the CFPB has fielded since its July 21 launch date. An entire section is devoted to how billing disputes are handled, and the top-most section presents APRs, another frequent offender, in a way that includes qualifiers that can end up hidden in the fine print.


At 1,100 words, it is also considerably shorter than current credit card agreements, which the CFPB says tend to be about 5,000 words. The CFPB has yet to specify where issuers would be required to advertise these forms, an important issue since many companies are already in the habit of hiding the terms and conditions of a card underneath the promotional materials on their website.


What do you think of the potential credit card agreement? Are there any areas that you think could still be improved upon? Let us know in the comments below.


More on MainStreet and MSN Money:

Dec 14, 2011 5:22PM
The CFPB's vision for a "shorter, simpler credit card agreement" is neither shorter, nor simpler than the ones currently used by card issuers.  The CFPB claims that the whole agreement consists of two pages, whereas it is actually eight pages long, once you include the part that consists of explanations of the terms used in the contract.

When you compare CFPB's proposed version to one currently used by American Express (see, they are both eight pages long, even though AmEx has dedicated a whole page to its rewards program, which the CFPB does not have to worry about.  Similarly, there is not much of a difference in how the two agreements explain various terms and conditions.
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