We’re watching you.
That was the message that Richard Cordray, the head of the federal Consumer Financial Protection Bureau, had for credit card issuers when he spoke this week to the business journalists attending the annual Society of American Business Editors and Writers conference this week in Indianapolis.
Cordray kept his formal remarks short, leaving lots of room for questions from the attending journalists.
I got one in about credit cards, asking, “Just over two years ago, the major tenets of the Credit CARD Act went into effect, so the question is, has it worked? And to the degree it hasn’t, will there be a need for another round of regulation or a CARD Act II?”
My short version of his answer: Yeah, it’s worked. I’m really close to this issue, and while the CARD Act eliminated the worst abuses, more may need to be done. We’re digesting what consumers have to say, and we’d really like it card issuers could come up with card agreements a human can understand.
Here’s the long version, a full transcript of his four-minute answer.
My first experience with this was when I was state treasurer of Ohio, and the Federal Reserve, as you’ll recall, proposed at long last two rules that would eliminate what were perceived as the most egregious credit card practices. And we warmly embraced that effort. In fact in Ohio, I created a grassroots effort that we called “Speak out Ohio” to generate comments into the comments process, which as you know is often a very inside baseball process in Washington.
We generated about a third of the comments nationwide that the Federal Reserve received about the credit card proposals, an outpouring of support to reform that market that we felt was important for them to hear because we knew they’d hear from other sides as well in the discussion. In the end we had to negotiate with the Federal Reserve IT department over how they would receive the 15,000 comments transmitted from Ohio. That then led and stimulated the Congress to enact many of those same provisions into the CARD Act, enshrining them into statute for all time, not leaving them subject to some regulator giving it or taking it away.
And that has been a significant development for the credit card market. Some of the really worst practices like retroactive changes to interest rates on existing balances, or manipulating timing on late payment fees, which was alleged to be done in some instances, and it was very confusing to customers. Those things were prohibited. Protections were put in place for students on campuses, and the like.
As with any law you’re going to go back. After two years is probably too short a term, because there’s implementation and so forth around that, and then we’ll judge whether more needs to be done and exactly what the consequences have been.
We had a CARD Act conference last fall, where we began engage, one year after the time — it was fairly new, not a lot of data yet, but enough to begin to see that there were very many positive changes as a result of the legislation.
We also have a real pulse on this because our consumer response line has been taking credit card complaints since we opened our doors in July of last year.
So we have seen exactly what consumers are finding out about their accounts and they’re telling us and we have some really good statistics on our website you may want to look at as to what kind of complaints we’re getting and what people are having trouble with. And we’re working with institutions as a result of those complaints. Sometimes with, sometimes cooperatively and sometimes we have to pursue lengths further.
So we can say without a doubt the statutory provisions have made a positive difference in any number of different ways. Whether it’s the be-all and end-all in the credit card market is something we’ll have to assess over time and as we hear more from consumers about their individual experiences.
We also think, and I would stress, that simplifying and clarifying the terms of credit card agreements for people so they can understand exactly what they’re getting into, and the terms are clear enough — so that they can know the deal they get today is the deal they’re going to have a month or a year from now — is very important to the market. Streamlining and clarifying terms is not only good for consumer choice, it’s also good for holding issuers accountable.