CFPB proposes simpler credit card agreement form

Bookshelf

The Consumer Financial Protection Bureau has proposed a new credit card agreement without an encyclopedia's worth of fine print. Image from Wikimedia Commons.

The Consumer Financial Protection Bureau, among other parties, has noted that consumers don’t like being swamped with legalese on credit card applications. So the agency has offered a prototype of a simple credit card agreement.

Simplified form still in beta

The findings of the first report by the fledgling Consumer Financial Protection Bureau were recently announced, concerning consumer dissatisfaction with credit cards. Among other complaints, many people are confused by the terms and language of credit card agreements.

Confusing legal writing in contracts in small print, often referred to as “legalese,” exists primarily because companies need to protect themselves from lawsuits. Some also argue they are intentionally written in the most confusing manner possible so people will sign it and not bother with reading it. Many people are fed up with it, and the CFPB has released a simplified version of a standard credit card agreement, according to USA Today, in order to get more people on board, as part of its Know Before You Owe campaign.

Proposed version much shorter

The main feature of the proposed credit card contract from the CFPB is that it is far shorter. The typical credit card agreement is about 5,000 words and has a lot of fine print and subsections and so forth. The proposed version is about 1,000 words. It also contains more simplified language, as some studies have shown that up to two-thirds of people don’t understand their credit card agreements.

The proposed contract, according to BusinessWeek, is about two pages. The online version of the contract also has a glossary of legal terms. If this contract were to become standardized, a print version would have a web address where customers can look up legal definitions.

The American Bankers Association has come out in favor of it, stating that it is a “step in the right direction.” However, it has also expressed reservations, according to ABC, that protection from lawsuits still needs to be included in any language in credit card contracts.

Demo at Pentagon bank

A demo version is going to be used at the Pentagon Federal Credit Union throughout the next year. During the first half of 2012, random customers of that bank applying for a Pentagon Federal Credit Union credit card will get the simplified version of the application. They will also be asked exit questions about their experience applying for a credit card using the CFPB application.

The CFPB is still hampered by political infighting, according to CBS. The White House has been urging the Senate to confirm Richard Cordry, the nominee for head of the agency, for some time. However, some members of the Senate opposed a single director being appointed because they think a board of directors should be in charge of the CFPB instead.

Sources

USA Today

BusinessWeek

ABC

CBS

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