Learn How the CFPB Protects Consumers in the Payment Card Market
Written by: Kristy Welsh
Last Updated: August 30, 2017
Is there any financial product you use more than a credit, debit, or prepaid card? Likely not, thus the importance of strict regulation of the payment card market — one of many financial products regulated by the Consumer Financial Protection Bureau (CFPB).
Administers CARD Act of 2009
Most notably, the CFPB administers the CARD Act of 2009, enacted to "establish fair and transparent practices related to the extension of credit," regulating both the underwriting and pricing of credit card accounts.
Major areas of the CARD Act's focus and, thus, the CFPB's responsibility, are as follows, including examples of each:
- Interest Rate Restrictions. For instance, credit card issuers cannot raise interest rates retroactively. Also, they cannot raise rates going forward during the first 12 months the account is open.
- Fee Restrictions. For instance, credit card issuers can only charge over limit fees if the card holder provides prior approval of them. Also, if a due date falls on a weekend or holiday, payment cannot be assessed a late fee as long as it is received by the next business day.
- Student Credit Card Restrictions. For instance, credit card issuers cannot issue a card to anyone under 21 years of age unless they can a) verify proof or income, or b) get a co-signer on the card. Also, credit card issuers can no longer entice students with free gifts in exchange for a credit card application.
- Gift Card Restrictions. For instance, gift cards cannot expire for at least 5 years from the date of activation. Also, gift cards cannot be assessed inactivity fees unless it has been a full 12 months since the last transaction.
- Billing Cycle and Payment Allocation Restrictions. For instance, credit card issuers can no longer calculate interest charges on both the current balance and the previous month's balance.
- Disclosure Statement Guidelines. For instance, credit card issuers must disclose to borrowers how long it will take them to pay off their balance if they only make the minimum payment.
It is the job of the CFPB to not only enforce these rules, but also to track their progress.
Design New and Improved Card Agreements and Disclosures
Shopping around for the right credit or prepaid card is challenging enough. But further confusing the process are agreements and disclosures that make side-by-side comparisons difficult.
The CFPB's simpler, streamlined credit card agreements and prepaid disclosure forms not only make comparison shopping easier, but also provide a clearer picture in keeping with the CFPB's "know before you owe" philosophy.
That said, their use is not mandatory. But, at the very least, noting what's included on the CFPB forms will help consumers know the key content to look for in other forms.
Maintains Database of Credit Card Agreements
Whether you already have a credit card in mind, or you're just shopping around, the CFPB credit card database is a great go-to tool.
Agreements of more than 300 credit card issuers are included in the database, which you can search by issuer or by specific text.
Accepts Credit Card Complaints
Do you have a billing dispute with your credit card issuer? Do you believe an increase in your interest rates is in violation of your rights? Do you suspect fraudulent transactions? Whatever the issue relative to your credit card, the CFPB wants to hear about it.
When you submit a complaint to the CFPB, the complaint and any supporting documentation is forwarded on to the company for their review. Once the CFPB submits your complaint, the company has 15 days to respond to the CFPB and to you. During this 15-day period, you can expect to receive from the CFPB email updates on your complaint status.
Note, the CFPB also shares complaints with state and federal law enforcement agencies, and sends a complaint report to Congress twice a year. Your complaint may also be posted to the Consumer Complaint Database (minus any personally-identifying information).
Writes New Rules and Regulations
As new issues arise, the CFPB has the authority to address them, writing new rules and regulations as deemed necessary.
For instance, relative to the payment card market, the CFPB has ruled that:
- Employers cannot require their employees to receive their paychecks via debit cards.
- If colleges and universities are making money off student ID debit cards, they must disclose the school-bank partnership on their website.
Seeks Input From Consumers
Beyond complaints, the CFPB solicits feedback from consumers on the agency's Federal Register notices. The CFPB website maintains an exhaustive list of open notices, where you can leave comments, as well closed notices, where you can read past comments as well.