Fed Surveys Consumers About Credit

[Aug 1, 2007.]

The Federal Reserve Board has now released its report on credit card solicitations and applications. The findings are significant, since the study included personal one-on-one interviews with American consumers.

The whole point of the study was to help make the terms and conditions of credit card accounts simpler for customers to comprehend. To that end, the Fed has produced a sample version of a possible disclosure form. Experts say the Fed version appears to be much clearer and more user-friendly than the current disclosure forms that are in use.

Under the Fed plan, credit card companies would have to let customers know in writing whenever there's a change in the terms of the account. Such a notice would include information about possible penalties that might await unsuspecting consumers. Credit card issuers would also have to give consumers plenty of advance notice when such changes are in the works.

The Fed sample appears to be an enhanced version of the so-called "Schumer Box" which the Royal Bank of Scotland issues with its cards.

Consumer advocates are likely to welcome efforts to make credit card agreements easier to understand. The more information a consumer has, the better-equipped he or she will be to manage monthly credit card bills. Such disclosure can also help customers to avoid "hidden penalties" which can have a significant effect on a family's monthly budget.

While credit card companies can claim that they currently provide all necessary information to consumers, some of that information reads like a law school textbook. Disclosure forms in particular can be difficult, if not impossible, for the typical consumer to understand.

Still, consumer advocates indicate that there are additional measures credit card companies could take in order to help consumers avoid massive credit card debt. For instance, some consumer activists are calling on credit card issuers to scale back questionable corporate practices such as universal default and double-cycle billing.

Julie Ann Amos
August 1st 2007

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