CARD Act Rules Review Pursuant to the Regulatory Flexibility Act; Request for Information Regarding Consumer Credit Card Market, 53299-53306 [2020-19112]
Download as PDF
<![CDATA[
53299
Proposed Rules
Federal Register
Vol. 85, No. 168
Friday, August 28, 2020
This section of the FEDERAL REGISTER
contains notices to the public of the proposed
issuance of rules and regulations. The
purpose of these notices is to give interested
persons an opportunity to participate in the
rule making prior to the adoption of the final
rules.
BUREAU OF CONSUMER FINANCIAL
PROTECTION
[Docket No. CFPB–2020–0027]
12 CFR Part 1026
CARD Act Rules Review Pursuant to
the Regulatory Flexibility Act; Request
for Information Regarding Consumer
Credit Card Market
Bureau of Consumer Financial
Protection.
ACTION: Regulatory review and request
for comments; request for information
regarding consumer credit card market.
AGENCY:
The Bureau of Consumer
Financial Protection (Bureau) is
requesting comment on two related, but
separate, reviews. First, the Bureau is
conducting a review of the Credit Card
Accountability Responsibility and
Disclosure Act of 2009 (CARD Act)
Rules. As part of this review, the Bureau
is seeking comment on the economic
impact of the CARD Act Rules on small
entities so that it can determine whether
the rules should be continued without
change, or should be amended or
rescinded, consistent with the stated
objectives of applicable statutes, to
minimize any significant economic
impact of the rules upon a substantial
number of such small entities. Second,
the Bureau is conducting a review of the
consumer credit card market, within the
limits of its existing resources available
for reporting purposes, pursuant to the
CARD Act, and is seeking comment on
a number of aspects of the consumer
credit card market.
DATES: Comments must be received by
October 27, 2020.
ADDRESSES: You may submit responsive
information and other comments,
identified by Docket No. CFPB–2020–
0027 by any of the following methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email: 2020-RFI-CardActReviews@
cfpb.gov. Include Docket No. CFPB–
SUMMARY:
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
2020–0027 in the subject line of the
message.
• Hand Delivery/Mail/Courier:
Comment Intake—CARD Act Rules RFA
Review and Credit Card Market Review,
Bureau of Consumer Financial
Protection, 1700 G Street NW,
Washington, DC 20552. Please note that
due to circumstances associated with
the COVID–19 pandemic, the Bureau
discourages the submission of
comments by hand delivery, mail, or
courier.
Instructions: The Bureau encourages
the early submission of comments. All
submissions must include the document
title and docket number. Please note the
specific rule or topic on which you are
commenting at the top of each response
(you do not need to address all rules or
topics). Because paper mail in the
Washington, DC area and at the Bureau
is subject to delay and in light of
difficulties associated with mail and
hand deliveries during the COVID–19
pandemic, commenters are encouraged
to submit comments electronically. In
general, all comments received will be
posted without change to https://
www.regulations.gov. In addition, once
the Bureau’s headquarters reopens,
comments will be available for public
inspection and copying at 1700 G Street
NW, Washington, DC 20552, on official
business days between the hours of 10
a.m. and 5 p.m. eastern time. At that
time, you can make an appointment to
inspect the documents by telephoning
202–435–9169.
All submissions in response to this
Request for Information (RFI), including
attachments and other supporting
materials, will become part of the public
record and subject to public disclosure.
Proprietary information or sensitive
personal information, such as account
numbers or Social Security numbers, or
names of other individuals, should not
be included. Submissions will not be
edited to remove any identifying or
contact information.
The Bureau is requesting comment on
the following two related, but separate,
reviews: (1) The RFA section 610
review; and (2) the CARD Act section
502(a) review. The Bureau requests that
when a commenter makes a specific
comment, the commenter indicates
whether that comment relates to the
RFA section 610 review, the CARD Act
section 502(a) review, or both.
PO 00000
Frm 00001
Fmt 4702
Sfmt 4702
FOR FURTHER INFORMATION CONTACT:
Yaritza Velez, Counsel, or Krista Ayoub,
Senior Counsel, Office of Regulations, at
202–435–7700. If you require this
document in an alternative electronic
format, please contact CFPB_
Accessibility@cfpb.gov.
The
Bureau is requesting comment on two
related, but separate, reviews. Part I sets
forth a description of the review of the
Credit Card Accountability
Responsibility and Disclosure Act of
2009 (CARD Act) 1 Rules (as defined
below) that the Bureau is conducting
consistent with section 610 of the
Regulatory Flexibility Act (RFA).2 As
discussed below, the CARD Act Rules
generally affect credit card issuers and
other creditors that offer open-end (not
home-secured) credit plans. The CARD
Act Rules also affect certain credit
unions that were offering certain
multifeatured plans at the time the
CARD Act Rules were adopted and were
separately approving and underwriting
certain advances under those plans. As
part of this review, the Bureau is
seeking comment on the economic
impact of the CARD Act Rules on small
entities so that the agency can
determine whether the rules should be
continued without change, or should be
amended or rescinded, consistent with
the stated objectives of applicable
statutes, to minimize any significant
economic impact of the rules upon a
substantial number of such small
entities.
Part II discusses the review that the
Bureau must conduct of the consumer
credit card market every two years
under section 502(a) of the CARD Act.3
To inform the Bureau’s next review, the
Bureau invites members of the public,
including consumers, credit card
issuers, industry analysts, consumer
groups, and other interested persons to
submit information and other comments
relevant to the issues identified in part
II, as well as any information they
believe is relevant to a review of the
credit card market. This review relates
to the credit card market generally, and
not just to small entities.
SUPPLEMENTARY INFORMATION:
1 Public Law 111–24, 123 Stat. 1734 (2009). One
purpose of the CARD Act is to establish fair and
transparent practices relating to the extension of
open-end consumer credit plans.
2 Public Law 96–354, 94 Stat. 1164 (1980).
3 See 15 U.S.C. 1616(a).
E:\FR\FM\28AUP1.SGM
28AUP1
53300
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
The statutory authorities require these
reviews, and these are not triggered by
the current, COVID–19 related economic
conditions, although the Bureau
recognizes that the information
submitted will reflect those conditions.
The Bureau believes that commenters
may benefit from the Bureau issuing one
RFI for the two reviews, because it
expects that some commenters may
wish to comment on both reviews and
may find some benefit in commenting
on both reviews at the same time. The
Bureau requests that when a commenter
makes a specific comment, the
commenter indicates whether that
comment relates to the RFA section 610
review, the CARD Act section 502(a)
review, or both.
I. RFA Section 610 Review
The RFA requires each agency to
consider the effect on small entities for
certain rules it promulgates.4
Specifically, section 610 of the RFA 5
provides that each agency shall publish
in the Federal Register a plan for the
periodic review of the rules issued by
the agency which have or will have a
significant economic impact upon a
substantial number of small entities.
The Bureau has published such a plan
in the Federal Register.6 Section 610
provides that the purpose of the review
is to determine whether such rules
should be continued without change, or
should be amended or rescinded,
consistent with the stated objectives of
applicable statutes, to minimize any
significant economic impact of the rules
upon a substantial number of such small
entities.7 As also set forth in section
610, in each review the Bureau will
consider several factors:
1. The continued need for the rule;
2. The nature of public complaints or
comments on the rule;
3. The complexity of the rule;
4. The extent to which the rule
overlaps, duplicates, or conflicts with
Federal, State, or other rules; and
5. The time since the rule was
evaluated or the degree to which
technology, market conditions, or other
factors have changed the relevant
market.8
A. CARD Act Rules
This section lists and briefly describes
the rules that the Bureau plans to review
in 2020 under the criteria described by
4 The term ‘‘small entity’’ is defined in the RFA.
See 5 U.S.C. 601(6).
5 5 U.S.C. 610(a).
6 84 FR 21732 (May 15, 2019).
7 5 U.S.C. 610(a).
8 5 U.S.C. 610(b).
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
section 610 of the RFA and pursuant to
the Bureau’s review plan.9
1. The Rules
From July 2009 to April 2011, the
Board of Governors of the Federal
Reserve System (Board) published an
interim final rule 10 and three final
rules,11 primarily to implement a
number of substantive and disclosure
provisions required by the CARD Act.
This document collectively refers to
these four rules as the ‘‘CARD Act
Rules.’’ 12 The CARD Act Rules
amended Regulation Z, which
implements the Truth in Lending Act
(TILA),13 and the official staff
commentary to the regulation, which
interprets the requirements of
Regulation Z.14 The Board issued the
CARD Act Rules pursuant to its
authority under section 2 of the CARD
Act 15 and TILA sections 105(a) and (f),
127(c)(5), 143, 148(d), and 149(b).16
Many of the provisions in the CARD
Act Rules apply to a ‘‘card issuer,’’ as
defined in § 1026.2(a)(7),17 that extends
credit under a ‘‘credit card account
under an open-end (not home-secured)
consumer credit plan,’’ as defined in
§ 1026.2(a)(15)(ii). Among other things,
the CARD Act Rules contain provisions
to implement the CARD Act that: (1)
Prohibit card issuers from extending
credit without assessing the consumer’s
ability to pay, with special rules
regarding the extension of credit to
persons under the age of 21; 18 (2)
restrict the amount of required fees that
a card issuer can charge during the first
year after an account is opened; 19 (3)
limit the amount card issuers can charge
for penalty fees, such as when a
consumer makes a late payment or
9 84
FR 21732 (May 15, 2019).
FR 36077 (July 22, 2009).
11 75 FR 7658 (Feb. 22, 2010); 75 FR 37526 (June
29, 2010); 76 FR 22948 (Apr. 25, 2011).
12 The CARD Act Rules also implemented the
Credit CARD Technical Corrections Act of 2009.
Public Law 111–93, 123 Stat. 2998 (2009); 75 FR
7658 (Feb. 22, 2010).
13 15 U.S.C. 1601 et seq.
14 The CARD Act Rules were originally adopted
by the Board in 12 CFR part 226 but, upon transfer
of authority by the Dodd-Frank Wall Street Reform
and Consumer Protection Act (Dodd-Frank Act) to
implement TILA to the Bureau, were renumbered
as 12 CFR part 1026. 76 FR 79768 (Dec. 22, 2011);
see also 81 FR 25323 (Apr. 28, 2016). The Bureau
subsequently amended some of the provisions in
the CARD Act Rules. See, e.g., 78 FR 18795 (Mar.
28, 2013); 78 FR 25818 (May 3, 2013).
15 Section 2 of the CARD Act states that the Board
‘‘may issue such rules and publish such model
forms as it considers necessary to carry out this
Act.’’ Public Law 111–24, 123 Stat. 1734 (2009).
16 15 U.S.C. 1604(a) and (f), 1637(c)(5), 1663,
1665c, and 1665d.
17 See also 15 U.S.C. 1602(o).
18 12 CFR 1026.51.
19 12 CFR 1026.52(a).
10 74
PO 00000
Frm 00002
Fmt 4702
Sfmt 4702
exceeds his or her credit limit; 20 (4)
restrict the circumstances under which
card issuers can increase interest rates
and certain fees on credit card accounts,
and require subsequent reevaluations of
rate increases; 21 (5) restrict fees for
over-the-limit transactions to one per
billing cycle and require that the
consumer opt in to payment of such
transactions in order for the fee to be
charged; 22 (6) restrict how payments in
excess of the minimum payment may be
allocated; 23 and (7) require card issuers
to submit to the Bureau agreements for
open-end consumer credit card plans,
and agreements with institutions of
higher education (or an affiliated
organization) regarding the issuance of
credit cards to students at that
institution.24
In addition to the provisions that
implement the CARD Act, the CARD
Act Rules also incorporated provisions
of (1) a final rule amending Regulation
Z that the Board adopted in January
2009 (January 2009 Regulation Z
Rule); 25 and (2) the Board’s final rule
amending Regulation AA under the
Federal Trade Commission Act (FTC
Act) 26 to protect consumers from unfair
acts or practices with respect to
consumer credit card accounts (January
2009 FTC Act Rule).27 The CARD Act
Rules generally incorporated these
provisions, with revisions as applicable
to be consistent with the CARD Act.28
The CARD Act Rules also generally
finalized provisions of the Board’s
proposed rules to provide clarifications
and technical amendments to the
January 2009 Regulation Z Rule and the
January 2009 FTC Act Rule (May 2009
Proposed Rules), with revisions as
20 12
CFR 1026.52(b).
CFR 1026.55 and 1026.59.
22 12 CFR 1026.56.
23 12 CFR 1026.53.
24 12 CFR 1026.57(d) and 1026.58(c). The CARD
Act Rules also contained the following other
provisions to implement the CARD Act: (1)
§ 1026.5(a)(2)(iii); (2) § 1026.5(b)(2)(ii)(A) and (B);
(3) § 1026.7(b)(11) and (12); (4) § 1026.9(c)(2), (e),
(g), and (h); (5) § 1026.10(b)(2)(ii), (b)(3), (d), (e), and
(f); (6) § 1026.11(c); (7) § 1026.16(f); (8) § 1026.57(a)
through (c); and (9) § 1026.58(a) through (b) and (d)
through (g).
25 74 FR 5244 (Jan. 29, 2009).
26 15 U.S.C. 41–58.
27 See 74 FR 5498 (Jan. 29, 2009). The Board
issued this final rule jointly with similar rules
issued by the Office of Thrift Supervision (OTS)
and the National Credit Union Administration
(NCUA).
28 74 FR 54124, 54125 (Oct. 21, 2009); 75 FR
7658, 7659 (Feb. 22, 2010). Because the Board
incorporated the provisions of the January 2009
Regulation Z Rule and the January 2009 FTC Act
Rule, as amended, into the CARD Act Rules, the
Board withdrew the January 2009 Regulation Z Rule
and the January 2009 FTC Act Rule. 75 FR 7925
(Feb. 22, 2010).
21 12
E:\FR\FM\28AUP1.SGM
28AUP1
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
applicable to be consistent with the
CARD Act.29
The Board adopted the January 2009
Regulation Z Rule following a
comprehensive review of TILA’s rules
for open-end (revolving) credit that is
not home-secured. The January 2009
Regulation Z Rule amended many of the
Regulation Z provisions that apply to
open-end credit, including those in
subparts A (General) and B (Open-end
Credit), appendix G, and related
commentary. The January 2009
Regulation Z Rule was designed, in part,
to improve the effectiveness of the
disclosures that ‘‘creditors,’’ as defined
in § 1026.2(a)(17),30 must provide under
Regulation Z to consumers at
application and throughout the life of an
open-end account.31 The January 2009
Regulation Z Rule provisions, as
amended, that the Board incorporated
into the CARD Act Rules, included
changes to the format, timing, and
content requirements for the five main
types of disclosures for open-end credit
governed by Regulation Z: (1) Credit and
charge card application and solicitation
disclosures; 32 (2) account-opening
disclosures; 33 (3) periodic statement
disclosures; 34 (4) subsequent notices
such as change-in-terms notices; 35 and
(5) advertising provisions.36 These
revisions to the disclosure provisions
generally affect creditors that offer openend (not home-secured) credit plans
(including credit card accounts and
open-end plans that are not credit card
accounts such as overdraft lines of
credit and other personal lines of
credit), and persons advertising openend (not home-secured) credit, whether
or not they are creditors.37
Among other things, the CARD Act
Rules also incorporated provisions from
the January 2009 Regulation Z Rule that
revised commentary to the definition of
‘‘open-end credit,’’ as defined in
§ 1026.2(a)(20).38 These revisions
clarified that advances that are
separately underwritten are generally
not open-end credit but closed-end
credit for which closed-end disclosures
must be given.39 The Board expected
these revisions to primarily impact
29 74 FR 20784 (May 5, 2009); 74 FR 20804 (May
5, 2009).
30 See also 15 U.S.C. 1602(g).
31 One purpose of TILA is to promote the
informed use of consumer credit by providing for
disclosures about its terms and cost. 15 U.S.C.
1601(a).
32 12 CFR 1026.60.
33 12 CFR 1026.6(b).
34 12 CFR 1026.7(b).
35 12 CFR 1026.9(c)(2) and (g).
36 12 CFR 1026.16.
37 74 FR 5244, 5249, 5391 (Jan. 29, 2009).
38 See also 15 U.S.C. 1602(j).
39 Comment 2(a)(20)–5.
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
certain credit unions that were at that
time offering certain multifeatured plans
and were separately approving and
underwriting certain advances under
those plans.40
The January 2009 FTC Act Rule
contained provisions that are similar to
several of those adopted in the CARD
Act.41 The January 2009 FTC Act Rule
was designed to protect consumers from
unfair acts or practices with respect to
consumer credit card accounts,
including (1) requiring institutions to
provide consumers with a reasonable
amount of time to make a payment
before the institution can consider the
consumer late in making that payment;
(2) requiring institutions to allocate
amounts paid in excess of the minimum
payment in specified ways; (3)
restricting institutions from increasing
rates on existing balances except in
specified circumstances; (4) prohibiting
institutions from imposing finance
charges based on balances for days in
billing cycles that precede the most
recent billing cycle as a result of the loss
of a grace period; and (5) limiting the
amount of fees for the issuance or
availability of credit that institutions
may charge to an account during the
first year after account opening. The
CARD Act Rules generally incorporated
these provisions, with revisions as
applicable to be consistent with the
CARD Act.
The May 2009 Proposed Rules
generally proposed clarifications and
technical amendments to the January
2009 Regulation Z Rule and the January
2009 FTC Act Rule. The Board proposed
these clarifications to resolve confusion
regarding how institutions would
comply with particular aspects of those
rules. The proposed amendments to the
January 2009 Regulation Z Rule also
included several proposed provisions
applicable to deferred interest plans,
such as plans that permit a consumer to
avoid interest charges if a purchase
balance is paid in full by a certain
date.42 The CARD Act Rules generally
finalized the provisions in the May 2009
Proposed Rules, with revisions as
applicable to be consistent with the
CARD Act.
The Bureau recodified Regulation Z,
including the amendments made by the
CARD Act Rules, in 2011 when the
Bureau assumed rulemaking
responsibility under TILA.43
40 74
FR 5244, 5258–60, 5391 (Jan. 29, 2009).
75 FR 7658, 7661–62, 7666–67 (Feb. 22,
41 See
2010).
42 74 FR 20784, 20786–87, 20788–91 (May 5,
2009); see also 12 CFR 1026.7(b)(14) and
1026.16(h).
43 76 FR 79768 (Dec. 22, 2011); see also 81 FR
25323 (Apr. 28, 2016).
PO 00000
Frm 00003
Fmt 4702
Sfmt 4702
53301
2. The Market
As discussed above in part I.A.1, the
CARD Act Rules primarily apply to
credit card accounts and other open-end
(not home-secured) products. The
Bureau has monitored the credit card
market generally, including through
biennial reviews and submission of
reports to Congress pursuant to section
502 of the CARD Act.44 To date, the
Bureau has issued four reports pursuant
to that obligation—in 2013, 2015, 2017,
and 2019 (collectively, the Reports).45
Several of these Reports have examined
changes in the credit card market since
the CARD Act Rules became effective,
although data have generally not been
available to evaluate changes specific to
small entities in a comparable level of
detail as was possible for large
entities.46
a. Credit Card Market
i. Market Structure and Participants
The credit card market is one of the
United States’ largest consumer
financial markets, with nearly 170
million Americans having at least one
credit card and collectively carrying
nearly $1 trillion in total credit card
debt.47 The market has been growing in
recent years by most measures, with
diverse participation from the largest
banks to small community banks, from
credit unions to non-bank program
managers, and from servicers to fintech
startups. The market is highly
concentrated, with the 10 largest issuers
consistently representing the majority of
total credit card balances, while many
smaller providers account for a smaller
share of balances.
In 2010, there were 4,642 banks,
thrifts, and credit unions that offered
credit cards and as a result were affected
by the CARD Act.48 Of these affected
44 See
15 U.S.C. 1616.
Bureau of Consumer Fin. Prot., CARD Act
Report, (Oct. 1, 2013) (2013 Report), https://
files.consumerfinance.gov/f/201309_cfpb_card-actreport.pdf; Bureau of Consumer Fin. Prot., The
Consumer Credit Card Market, (Dec. 2015) (2015
Report), https://files.consumerfinance.gov/f/
201512_cfpb_report-the-consumer-credit-cardmarket.pdf; Bureau of Consumer Fin. Prot., The
Consumer Credit Card Market, (Dec. 2017) (2017
Report), https://files.consumerfinance.gov/f/
documents/cfpb_consumer-credit-card-marketreport_2017.pdf; Bureau of Consumer Fin. Prot.,
The Consumer Credit Card Market, (Aug. 2019)
(2019 Report), https://files.consumerfinance.gov/f/
documents/cfpb_consumer-credit-card-marketreport_2019.pdf.
46 See 2017 Report at 19 n.13.
47 See 2019 Report at 6, 11.
48 This analysis considers data reported through
the Federal Financial Institutions Examination
Council (FFIEC) Call Report and NCUA Call Report
to determine the number of banks, thrifts, and
credit unions that participate in the credit card
45 See
E:\FR\FM\28AUP1.SGM
Continued
28AUP1
53302
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
entities, 4,044 were small entities as
defined by the current SBA threshold of
$600 million or less in total assets.49
The trend toward bank and credit union
consolidation was present prior to the
CARD Act and has continued, which
has reduced the number of small
entities participating in the credit card
market. As of 2019, 4,305 banks, thrifts,
and credit unions offered credit cards,
of which 3,437 were considered small
entities.50
Consumer credit cards generally can
be divided into two distinct segments:
general purpose cards and private label
cards. General purpose cards are credit
cards that can be used to purchase
goods and services at a wide range of
merchants. These cards display the
brand of a major payment card network,
most commonly American Express,
Discover, Mastercard, or Visa. General
purpose cards are offered by many
banks, credit unions, and community
banks. Some card issuers specialize in
offering credit cards to consumers with
subprime credit scores, while others
may offer credit cards to consumers
with prime or non-prime scores.
In contrast, private label cards—
sometimes called ‘‘store cards’’—do not
carry a network brand. Consumers can
use these cards only at the particular
merchant or affiliated group of
merchants associated with the card.
This segment is highly concentrated,
with only a handful of providers
representing the overwhelming share of
private label credit card balances.
Deferred interest is a notable feature
with this kind of card.
ii. Credit Card Pricing Structure and
Credit Availability
Credit card pricing is fairly complex
and involves different components,
such as interest rates and fees. The cost
to the consumer also depends on a
number of consumer-dependent factors,
such as the cardholder’s
market. Call Report data are matched to data on
institution characteristics and banking structure
from the Board’s National Information Center. Prior
to the first quarter of 2012, thrifts were not required
to file a Call Report, likely resulting in an
underestimate of the number of thrifts operating in
the credit card market prior to 2012. To determine
whether an entity is considered small according to
the Small Business Administration (SBA)
definition, this analysis uses average assets across
the calendar year.
49 U.S. Small Bus. Admin., Table of Small
Business Size Standards Matched to North
American Industry Classification System Codes,
effective Aug. 19, 2019, Sector 52 (Finance and
Insurance), https://www.sba.gov/document/
support—table-size-standards.
50 Other potentially affected small entities include
non-depository institutions that issue credit cards,
though data are currently too limited to assess the
number of such entities.
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
creditworthiness, usage of features and
rewards, and repayment behavior.
Consumers who utilize a credit card
may pay for that credit in a number of
different ways. Consumers may be
charged an annual (or monthly) fee.
They may incur penalty fees if they
violate the account terms, most
commonly by making a payment late.
They may be charged a variety of other
fees relating to specific features or
usages of the account, such as cash
advance fees, balance transfer fees, or
foreign transaction fees. Finally,
consumers may pay interest charges if,
for example, consumers carry a balance
from month-to-month or utilize a cash
advance.
As discussed above, pursuant to the
CARD Act,51 the Bureau has published
four Reports detailing its reviews of the
state of the credit card market in which
it examines, among other things, the
cost and availability of card credit and
recent innovations in the market.
Several of these Reports have also
examined changes in the credit card
market since the CARD Act Rules
became effective, although data have
generally not been available to evaluate
changes specific to small entities in a
comparable level of detail as was
possible for large entities.52 The
Bureau’s Reports observed the following
changes in terms of credit card pricing
following the implementation of the
CARD Act: (1) Over-the-limit fees
declined sharply, to a nearly nonexistent level, after the effective date of
the CARD Act opt-in rule in February
2010; (2) The average late fee declined
from the fourth quarter of 2009 to the
same quarter in 2010, following the
effective date of the CARD Act Rules’
safe harbors for penalty fee amounts; (3)
There has been an increase in the
amount and prevalence of annual fees
following the CARD Act’s
implementation; 53 and (4) The total
fees, as a share of cycle ending balance,
however, were 180 basis points (43
percent) lower in the fourth quarter of
2010 than the same quarter of 2008,
prior to the implementation of the
CARD Act. This effect was most
noticeable for the deep subprime
U.S.C. 1616.
2017 Report at 19 n.13.
53 Rewards cards may be a reason for the increase
in credit card annual fees. See 2019 Report at 12.
Credit card rewards programs have rapidly
increased in prevalence over the past decade.
Issuers are offering a greater diversity of rewards
programs—and in many cases more compelling
value propositions—to match the increasing
popularity of these products with consumers. For
many consumers, rewards have become central to
the decision of which credit cards to acquire and
how to use them. See 2015 Report at 263; 2017
Report at 60; 2019 Report at 100–101.
segment, which may be correlated with
the 25 percent fee cap for cards in their
first year as set forth in the CARD Act.
In addition, the Reports also found
that, beginning in the first quarter of
2009 and continuing through the second
quarter of 2010, the first full quarter
after most of the provisions of the CARD
Act took effect in February 2010, the
account-weighted average retail annual
percentage rate (APR) 54 increased by
230 basis points. The increase was more
modest among accounts with deep
subprime credit scores and highest
among accounts held by consumers
with prime and superprime credit
scores. However, for accounts with deep
subprime credit scores, the effective
interest rate fell by 200 basis points
from the fourth quarter of 2008 to the
same quarter in 2012, with much of that
decline occurring during the period
prior to when most of the CARD Act
provisions became effective in February
2010 when retail APRs were increasing.
Also, the incidence of repricing 55 has
come down significantly and has
remained at very low levels since the
CARD Act’s February 2010 effective
date of limitations on repricing activity.
The Reports also found changes
related to credit availability. First, the
Reports found that there has been a
reduction in the availability of credit for
consumers with subprime scores as well
as for students and young adults, the
latter a direct effect of the CARD Act’s
restrictions on issuing cards to students
and individuals under the age of 21.
Second, a small but discernible
percentage of applicants that issuers
deemed otherwise creditworthy were
declined as a result of insufficient
income to satisfy the CARD Act’s
ability-to-pay requirement. Third, there
has been a marked decline in the
percentage of consumers receiving
credit line increases on their accounts,
also possibly due to the ability-to-pay
requirement. Fourth, the Bureau
reviewed evidence that suggested
issuers might be using line management
as a means of responding to revealed
risk post-origination, in place of
repricing balances in ways restricted by
the CARD Act.
51 15
52 See
PO 00000
Frm 00004
Fmt 4702
Sfmt 4702
54 Discussions of credit card interest rates often
focus on the APR as it is the interest rate charged
on balances (the ‘‘retail APR’’). The APR is often
used as shorthand for expressing the costs
associated with using a credit card. However, for
several reasons, the retail APR may not provide an
accurate indication of the effective interest rates
paid by consumers. The effective interest rate is
defined as total interest charges for a period of time,
stated as a percent of average cycle-ending balance
for the same period of time. 2013 Report at 29.
55 Repricing is a practice in which an issuer
increases a consumer’s APR.
E:\FR\FM\28AUP1.SGM
28AUP1
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
The Bureau’s 2019 Report included a
review of academic scholarship
examining the CARD Act’s effects. In
many cases, these academic analyses
corroborate the Bureau’s findings from
prior years’ card market reports
including, for example, findings that the
CARD Act led to reductions in
consumers’ total payments toward
certain fees such as late fees and overlimit fees. However, across the
methodologies and analyses reviewed, a
consistent theme is the challenge of
disentangling the effects of the CARD
Act itself, rather than the effects of other
market changes such as the Great
Recession. Overall, the scholarship
review suggests that the CARD Act’s
effect on consumer welfare is mixed,
with some scholarship suggesting the
CARD Act may have had unintended
consequences.56
iii. Other Developments and Innovation
The Reports also discuss new
developments and innovation in the
credit card market since the CARD Act
Rules became effective. The following
section discusses: (1) Credit card
agreements; (2) use of digital account
servicing platforms; (3) new fixed
payment features being offered; and (4)
credit card payment rates.
The Bureau’s 2013 Report found that
credit card agreements became simpler
and shorter after the CARD Act Rules
became effective.57 However, the
Bureau’s 2015 Report noted that card
agreements became longer, but not more
complex, from 2012 to 2014.58 The
Bureau’s 2017 Report noted declines in
the complexity level of credit card
pricing disclosures from 2009 to 2010,
and that the level of complexity had
remained stable.59 These agreements
remain complex documents.
Consumers are increasingly relying on
digital account servicing platforms, such
as websites or mobile applications,
where consumers can view and manage
account activity. As of 2018, 78 percent
of active accounts were enrolled in
online portals for general purpose cards,
as compared to 55 percent in 2014.60
The share of accounts held by
consumers who opt out of paper billing
statements has risen by more than onethird since 2014,61 and the share of
accounts held by consumers who make
payments against their accounts using
digital channels has risen from 38
2019 Report at 13.
Report at 5, 63–66.
58 2015 Report at 119–23.
59 See 2017 Report at 195–205.
60 2019 Report at 48.
61 2019 Report at 49.
percent reported in 2013 62 to 55 percent
in 2018.63
A few issuers have begun offering a
feature that leverages a card’s existing
credit line to provide a fixed repayment
plan that is separate from payments
made toward the revolving balance on
the account. Issuers have implemented
a variety of these types of payment
options into the card servicing platform
for easier signup. New flexible payment
features of credit card accounts fall into
two categories: those that provide a
payment plan for existing purchases and
those that provide a payment plan for
future purchases.64
Fixed payment plans for existing
purchases allow certain individual
purchases made on a credit card to be
paid off using fixed monthly payments
over a set period of time. Issuers that
offer this type of feature let consumers
select eligible transactions through the
card’s mobile app or online portal for
fixed monthly payments. The issuers’
products (or announced products) differ
slightly but, in general, purchases over
a certain dollar threshold are eligible.65
Credit repayment flexibility is not
new, but today’s options differ in their
use of credit card mobile apps. One
issuer launched a credit card balance
management platform in 2009, but it
was delivered separately from the
primary account interaction. Today’s
repayment flexibility products are
presented to the consumer in the flow
of viewing his or her transaction history.
Eligible transactions are denoted with
an icon that links to the product terms.
A range of repayment periods and
corresponding costs are offered (e.g.,
three payments, six payments, or 12
payments). In addition, one issuer
provides a corresponding feature
through which cardholders may pay
down the account balance in an amount
equal to a specific transaction’s dollar
amount.66
The second set of flexible repayment
options for credit card accounts consists
of features that provide a payment plan
for purchases yet to be made. Multiple
issuers offer cardholders the
opportunity to receive a cash
disbursement from an unused portion of
their credit line, which is repaid in
equal monthly payments over a set
period of time. These initiatives allow
the issuers to increase consumer use of
portions of credit line that are not
currently being used. A card issuer may
offer this feature to cardholders that
53303
meet certain basic eligibility checks,
such as satisfactory payment history on
the card and meaningful unused line
size. Cardholders may be able to select
different lengths of repayment,
depending on their eligibility. The
transactions extended under this feature
are repaid using equal monthly
payments for a set period of time.67
These fixed payment plans and their
structures involve a broad array of
regulatory provisions adopted in the
CARD Act Rules, such as limitations on
APR and fee increases, payment
allocation rules, and ability to pay.68
Credit card payment rates have been
increasing since 2010, as measured by
total payments as a share of total
statement balances. It is unclear
precisely what combination of factors
has contributed to this change.
However, increases in payment rates
have coincided with some of the
regulatory changes created by the CARD
Act, such as clearer due dates, new
ability-to-pay rules, and payment
disclosure requirements, along with the
improvement in macroeconomic
conditions and changes in consumer
profiles.69
b. Other Open-End (Not Home-Secured)
Products
As discussed in part I.A.1, the CARD
Act Rules include some provisions that
apply to open-end (not home-secured)
plans generally, including open-end
plans that are not credit card accounts,
such as overdraft lines of credit and
other personal lines of credit. The
Bureau is aware, through its market
monitoring function, of the growth of
open-end personal lines of credit.
Several non-depository lenders offer
small-dollar open-end personal lines of
credit in amounts ranging from
approximately $500 to $4,500. Some
States specifically authorize personal
small-dollar lines of credit. For
example, the Tennessee Flexible Credit
Act allows licensed lenders to make
open-end lines of credit, unsecured or
secured by personal property, with an
outstanding principal balance of no
more than $4,000.70 Even with this
market monitoring, the Bureau does not
know with certainty the total number of
small entities that offer open-end (not
home-secured) products that are not
credit card accounts. Individuals and
businesses may extend small amounts of
consumer credit covered by TILA and
56 See
57 2013
VerDate Sep<11>2014
17:08 Aug 27, 2020
Report at 68.
Report at 53.
64 Id. at 177.
65 Id. at 178.
66 Id.
Jkt 250001
62 2013
67 Id.
63 2019
68 Id.
PO 00000
Frm 00005
Fmt 4702
at 179.
69 See
2015 Report at 49–50.
Code Ann. sec. 45–12–101, 45–12–102,
and 45–12–111.
70 Tenn.
Sfmt 4702
E:\FR\FM\28AUP1.SGM
28AUP1
53304
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
Regulation Z without the Bureau’s
awareness.71
As discussed in part I.A.1, the CARD
Act Rules also had an impact on certain
multifeatured plans that were being
offered by credit unions at the time the
CARD Act Rules were adopted. Some
reports suggest these plans were offered
by over 3,000 credit unions prior to the
adoption of the CARD Act Rules,72 with
others citing a number just under
2,000,73 although more recent data
appear to be unavailable.
The NCUA in July 2012 issued a
supervisory letter to provide guidance to
federal credit unions on a permissible
blended approach to multifeatured
lending that is consistent with the
CARD Act Rules.74 In preparing this
letter, NCUA consulted with the Bureau
on the interpretation of Regulation Z as
it relates to multifeatured open-end
lending. Among other things, this letter
discussed a permissible blended
approach to multifeatured lending that
has a single loan agreement with both
open-end and closed-end credit
subaccounts. NCUA indicated that this
blended approach is consistent with
Regulation Z, provided the credit union
complies with the requirements under
12 CFR part 1026, subpart B for openend credit and 12 CFR part 1026,
subpart C, for each closed-end loan
transaction under the single plan.
3. Bureau Resources and Analysis
Since 2011, the Bureau has published
various reports and other materials
71 See 12 CFR 1026.1(c)(1). Regulation Z generally
applies to each individual or business that offers or
extends credit when four conditions are met: (i) The
credit is offered or extended to consumers; (ii) the
offering or extension of credit is done regularly; (iii)
the credit is subject to a finance charge or is payable
by a written agreement in more than four
installments; and (iv) the credit is primarily for
personal, family, or household purposes.
72 Nicole Kellner-Swick & Ashley L. Sweeney,
Multi-Featured Open-End Lending: The Past,
Present and Future, That Credit Union Blog (Jan. 23,
2013), https://thatcreditunionblog.wordpress.com/
2013/01/23/multi-featured-open-end-lending-thepast-present-and-future/; Michelle A. Samaad,
Open-End Lending Drop Blamed on Regs,
Confusion, Credit Union Times (Aug. 5, 2012),
https://www.cutimes.com/2012/08/05/open-endlending-drop-blamed-on-regs-confusion/
?slreturn=20180603145338.
73 In response to the initial regulatory flexibility
analysis in relation to the January 2009 Regulation
Z Rule, a commenter that provides insurance and
related financial services to credit unions reported
that based on internal records, over 1,900 credit
unions with assets under $50 million and that offer
multifeatured plans would incur an average cost of
$100,000 per credit union to switch to closed-end
disclosures if clarifications related to the definition
of open-end credit were adopted as proposed. 74 FR
5244, 5391 (Jan. 29, 2009).
74 Nat’l Credit Union Admin., Multi-Featured
Open-End Lending (MFOEL) (July 2012), https://
www.ncua.gov/regulation-supervision/letters-creditunions-other-guidance/multi-featured-open-endlending-mfoel-0.
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
about the credit card market. As
discussed in part I.A.2 and pursuant to
the CARD Act, the Bureau has
published four Reports detailing its
reviews of the state of the credit card
market in which it examines, among
other things, the cost and availability of
card credit and recent innovations in
the market. In 2011, the Bureau
published findings from a Bureauconvened conference on the effects of
the CARD Act.75 Pursuant to the CARD
Act,76 the Bureau publishes annually a
report that discusses agreements
between card issuers and institutions of
higher education (or certain
organizations affiliated with such
institutions) in connection with the
issuance of credit cards. To date, the
Bureau has published eight of these
reports.77 Other Bureau reports specific
to the credit card market have generally
focused on consumer behaviors in the
market, including end-of-year credit
card borrowing and patterns of
revolving and repayment.78
Pursuant to the CARD Act and TILA,
the Bureau collects various information
from card issuers. The Bureau collects
credit card agreements from card issuers
on a quarterly basis.79 The Bureau
publishes the agreements on its website
in the credit card agreement database.80
In addition, the Bureau collects
annually and publishes on its website
college credit card marketing agreement
data and credit card issuers’ marketing
agreements with colleges, universities,
and their affiliates, as well as the
number of cards covered by, and the
amount of payments made by issuers
under these agreements.81 The Bureau
75 See Press Release, Bureau of Consumer Fin.
Prot., CFPB Launches Public Inquiry on the Impact
of the Card Act (Dec. 19, 2012), https://
www.consumerfinance.gov/about-us/newsroom/
consumer-financial-protection-bureau-launchespublic-inquiry-on-the-impact-of-the-card-act/.
76 15 U.S.C. 1637(r)(3).
77 Bureau of Consumer Fin. Prot., Student
banking reports to Congress, https://
www.consumerfinance.gov/data-research/studentbanking/student-banking-reports-congress/(last
visited July 29, 2020). The Board published two
such reports subsequent to the passage of the CARD
Act but prior to the transfer of this CARD Act
mandate to the Bureau.
78 See Bureau of Consumer Fin. Prot., Quarterly
consumer credit trends: End-of-year credit card
borrowing (June 2018), https://
www.consumerfinance.gov/data-research/researchreports/quarterly-consumer-credit-trends-end-yearcredit-card-borrowing/; Bureau of Consumer Fin.
Prot., Data point: Credit card revolvers (July 2019),
https://www.consumerfinance.gov/data-research/
research-reports/data-point-credit-card-revolvers/.
79 15 U.S.C. 1632(d)(2) and (3).
80 Bureau of Consumer Fin. Prot., Credit card
agreement database, https://
www.consumerfinance.gov/credit-cards/
agreements/ (last visited July 29, 2020).
81 15 U.S.C. 1637(r)(2); Bureau of Consumer Fin.
Prot., College credit card marketing agreements and
PO 00000
Frm 00006
Fmt 4702
Sfmt 4702
also collects information semi-annually
from certain card issuers through its
terms of credit card plans (TCCP) survey
and publishes these data on its
website.82 These data show features of
the most commonly held (i.e., modal)
credit card for issuers that report such
information. Other previously collected
data include the credit card database,
which shows monthly account-level
aggregates for credit cards from several
large issuers, and surveys of several
credit card issuers including questions
regarding card application and
approval, digital account servicing,
deferred interest, and loan
performance.83 Other data similar to
these monthly account-level aggregates
are also shared with the Bureau via
memoranda of understanding (MOUs)
with other bank regulators.
4. Previous Input to the Bureau
In 2011, the Bureau issued an RFI
related to streamlining regulatory
requirements (2011 RFI).84 The 2011
RFI asked the public to identify
provisions of the inherited regulations
that the Bureau should make the highest
priority for updating, modifying, or
eliminating because they are outdated,
unduly burdensome, or unnecessary.
The 2011 RFI also discussed several
specific requirements that may warrant
review, such as the ability-to-pay rules.
It also sought suggestions for practical
measures to make complying with the
regulations easier. The Bureau received
around 10 letters that included
information about credit card accounts
and open-end (not home-secured) credit
generally. These comments came from a
variety of stakeholders, including trade
groups and other market participants,
card issuers, and consumer advocacy
groups.
Also, as discussed in part I.A.2 and
pursuant to the CARD Act, the Bureau
has published four biennial Reports on
the state of the credit card market that
examine, among other things, the cost
and availability of card credit and recent
innovations in the market. In
connection with these Reports, the
CARD Act requires the Bureau to
‘‘solicit comment from consumers,
credit card issuers, and other interested
parties.’’ 85 For each of the four Reports,
data, https://www.consumerfinance.gov/dataresearch/student-banking/marketing-agreementsand-data/ (last visited July 29, 2020).
82 15 U.S.C. 1646; Bureau of Consumer Fin. Prot.,
Terms of credit card plans (TCCP) survey, https://
www.consumerfinance.gov/data-research/creditcard-data/terms-credit-card-plans-survey/ (last
visited July 29, 2020).
83 12 U.S.C. 5512(c)(4).
84 76 FR 75825 (Dec. 5, 2011).
85 15 U.S.C. 1616(b).
E:\FR\FM\28AUP1.SGM
28AUP1
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
the Bureau has done so through a RFI
published in the Federal Register.86 In
these RFIs, the Bureau sought comment
on various topics, including the terms of
credit card agreements and practices of
credit card issuers, the effectiveness of
credit card disclosures, the adequacy of
protection from unfair or deceptive acts
or practices, whether the CARD Act
affects the cost and availability of credit,
whether the CARD Act has had an
impact on issuer safety and soundness,
whether the CARD Act had any effect on
the use of risk-based pricing, and
whether the CARD Act had any impact
on credit card innovation. In response to
the RFIs, comments were submitted by
a variety of stakeholders, including
trade groups representing credit card
issuers and other market participants,
card issuers, other industry-side market
participants, individual consumers, and
consumer advocacy groups. Each of the
four Reports discussed the comments
received, as applicable, in response to
the relevant RFI.
The Bureau also received information
about credit card accounts and openend (not home-secured) credit generally
in response to the Bureau’s 2018 Call for
Evidence Initiative, which included
requesting input on all inherited
regulations and rulemaking
authorities.87 The Bureau received 13
comments that included information
about credit card accounts and openend (not home-secured) credit generally.
These comments came from a variety of
stakeholders, including trade groups
representing credit card issuers and
other market participants, card issuers,
and consumer advocacy groups.
Through the RFIs discussed above,
market monitoring, and other measures,
the Bureau has heard concerns
expressed by some card issuers and
trade groups about several of the CARD
Act Rules’ provisions and how they
apply to credit card accounts, such as
concerns about (1) application, accountopening, periodic statement, and
advertising disclosure rules; (2) format
and font size requirements for
disclosures; (3) change-in-terms notice
and penalty rate notice requirements; (4)
billing error rights and procedures; (5)
ability-to-pay requirements; (6)
restrictions on rate and fee increases; (7)
restrictions on certain fees imposed
during the first year after account
opening; (8) restrictions on penalty fees;
(9) rules for reevaluating rate increases;
(10) restrictions on how payments may
86 77
FR 75410 (Dec. 20, 2012); 80 FR 14365 (Mar.
19, 2015); 82 FR 13313 (Mar. 10, 2017); 84 FR 647
(Jan. 31, 2019).
87 83 FR 12881 (Mar. 26, 2018).
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
be allocated; and (11) submission of
account agreements to the Bureau.
The Bureau’s experience suggests
there is little overlap, duplication, or
conflict between the CARD Act Rules
and Federal, State, or other rules. The
Bureau has not received any requests for
a determination that the CARD Act
Rules preempt State law.
B. Request for Comment
Consistent with the section 610
review plan, the Bureau asks the public
to comment on the CARD Act Rules,
including the following topics:
(1) The current scale of the economic
impacts of the rules as a whole on small
entities and of their major components
on small entities, including impacts on
reporting, recordkeeping, and other
compliance requirements.
(2) Whether and how those impacts
on small entities could be reduced,
consistent with the stated objectives of
applicable statutes and the rules.
(3) Current information relevant to the
factors that the Bureau is required to
consider in completing a section 610
review under the RFA, as described
above.
Where possible, please submit
detailed comments, data, and other
information to support any submitted
positions.
II. CARD Act Section 502(a) Review
As discussed in part I.A.2, section
502(a) of the CARD Act 88 requires the
Bureau to conduct a review, within the
limits of its existing resources available
for reporting purposes, of the consumer
credit card market every two years. As
discussed in part I.A.4, to inform that
review, CARD Act section 502(b)
instructs the Bureau to seek public
comment.89
As discussed in part I.A.2, the Bureau
has issued four Reports in relation to
these reviews. The Bureau’s first Report
describing this review was published in
October 2013; the Bureau’s second such
Report was published in December
2015; the Bureau’s third such Report
was published in December 2017; and
the Bureau’s fourth such Report was
published in August 2019. To inform
the Bureau’s next review, the Bureau
invites members of the public, including
consumers, credit card issuers, industry
analysts, consumer groups, and other
interested persons to submit
information and other comments
relevant to the issues expressly
identified in part II.B below, as well as
any information they believe is relevant
to a review of the credit card market.
88 See
89 See
PO 00000
15 U.S.C. 1616(a).
15 U.S.C. 1616(b).
Frm 00007
Fmt 4702
Sfmt 4702
53305
A. Background: The CARD Act
The CARD Act was signed into law in
May 2009.90 Passage of the CARD Act
was expressly intended to ‘‘establish fair
and transparent practices related to the
extension of credit’’ in the credit card
market.91 As discussed in part I.A.1, to
achieve these agreed-upon purposes, the
CARD Act changed the requirements
applicable to credit card practices in a
number of significant respects.92
B. Request for Comment
In connection with its pending
review, the Bureau seeks information
from members of the public about how
the credit card market is functioning.
The Bureau seeks comments on the
experiences of consumers and providers
in the credit card market and on the
overall health of the credit card market,
as outlined in CARD Act section 502(a)
and in (1) through (7) below. As noted
above, while the Bureau identifies
specific topics of interest below, the
Bureau wants to be alerted to and
understand the information that
consumers, credit card issuers, industry
analysts, consumer groups, and other
interested persons believe is most
relevant to the Bureau’s review of the
credit card market, so this list of
subjects should not be viewed as
exhaustive. Commenters are encouraged
to address any other aspects of the
consumer credit card market that they
consider would be of interest or concern
to the Bureau.
Please feel free to comment generally
and/or respond to any or all of the
questions below but please indicate in
your comments on which topic areas or
questions you are commenting:
(1) The terms of credit card
agreements and the practices of credit
card issuers.
a. How have the substantive terms
and conditions of credit card
agreements or the length and
complexity of such agreements changed
over the past two years?
b. How have issuers changed their
pricing, marketing, underwriting, or
other practices?
c. How are the terms of, and practices
related to, major supplementary credit
card features (such as credit card
rewards, deferred interest promotions,
balance transfers, and cash advances)
evolving?
d. How have issuers changed their
practices related to deferment,
90 The CARD Act’s provisions took effect in three
stages: August 2009, February 2010, and October
2011.
91 Public Law 111–24, 123 Stat. 1734 (2009).
92 See also 2013 Report at 10–13.
E:\FR\FM\28AUP1.SGM
28AUP1
53306
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 / Proposed Rules
forbearance, or other forms of debt relief
or assistance offered to consumers?
e. How have creditors as well as thirdparty collectors changed their practices
over the past two years of collecting on
delinquent and charged-off credit card
debt?
f. Has the use of electronic
communication (e.g., email or SMS) by
creditors and debt collectors in
connection with credit card debt grown
or otherwise evolved?
g. How are the practices of for-profit
debt settlement companies changing
and what trends are occurring in the
debt settlement industry? How are
creditors and non-profit credit
counseling agencies responding to these
changes and trends?
(2) The effectiveness of disclosure of
terms, fees, and other expenses of credit
card plans.
a. How effective are current
disclosures of rates, fees, and other cost
terms of credit card accounts in
conveying to consumers the costs of
credit card plans?
b. What further improvements in
disclosure, if any, would benefit
consumers and what costs would card
issuers or others incur in providing such
disclosures?
c. How well are current credit card
disclosure rules and practices adapted
to the digital environment? What
adaptations to credit card disclosure
regimes in the digital environment
would better serve consumers or reduce
industry compliance burden?
(3) The adequacy of protections
against unfair or deceptive acts or
practices relating to credit card plans.
a. What unfair, deceptive, or abusive
acts and practices exist in the credit
card market? How prevalent are these
acts and practices and what effect do
they have? How might any such conduct
be prevented and at what cost?
(4) The cost and availability of
consumer credit cards.
a. How have the cost and availability
of consumer credit cards (including
with respect to non-prime borrowers)
changed since the Bureau reported on
the credit card market in 2019? What is
responsible for changes (or absence of
changes) in cost and availability? Has
the impact of the CARD Act on cost and
availability changed over the past two
years?
b. How, if at all, are the characteristics
of consumers with lower credit scores
changing? How are groups of consumers
in different score tiers faring in the
market? How do other factors relating to
consumer demographics or financial
lives affect consumers’ ability to
successfully obtain and use card credit?
VerDate Sep<11>2014
17:08 Aug 27, 2020
Jkt 250001
(5) The safety and soundness of credit
card issuers.
a. How is the credit cycle evolving?
What, if any, safety and soundness risks
are present or growing in this market,
and which entities are
disproportionately affected by these
risks? How, if at all, do these safety and
soundness risks to entities relate to
long-term indebtedness on the part of
some consumers, or changes in
consumers’ ability to manage and pay
their debts? Has the impact of the CARD
Act on safety and soundness changed
over the past two years?
(6) The use of risk-based pricing for
consumer credit cards.
a. How has the use of risk-based
pricing for consumer credit cards
changed since the Bureau reported on
the credit card market in 2019? What
has driven those changes or lack of
changes? Has the impact of the CARD
Act on risk-based pricing changed over
the past two years?
b. How have CARD Act provisions
relating to risk-based pricing impacted
(positively or negatively) the evolution
of practices in this market?
(7) Consumer credit card product
innovation.
a. How has credit card product
innovation changed since the Bureau
reported on the credit card market in
2019? What has driven those changes or
lack of changes? Has the impact of the
CARD Act on product innovation
changed over the past two years?
b. How have broader innovations in
finance, such as (but not limited to) new
products and entrants, evolving digital
tools, greater availability of and new
applications for consumer data, and
new technological tools (like machine
learning), impacted the consumer credit
card market, either directly or
indirectly? In what ways do CARD Act
provisions or its implementing
regulations encourage or discourage
innovation? In what ways do
innovations increase or decrease the
impact of certain CARD Act provisions,
or change the nature of those impacts?
Signing Authority
The Director of the Bureau, having
reviewed and approved this document,
is delegating the authority to
electronically sign this document to
Laura Galban, a Bureau Federal Register
Liaison, for purposes of publication in
the Federal Register.
Dated: August 26, 2020.
Laura Galban,
Federal Register Liaison, Bureau of Consumer
Financial Protection.
[FR Doc. 2020–19112 Filed 8–27–20; 8:45 am]
BILLING CODE 4810–AM–P
PO 00000
Frm 00008
Fmt 4702
Sfmt 4702
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR Part 71
[Docket No. FAA–2020–0666; Airspace
Docket No. 20–ACE–16]
RIN 2120–AA66
Proposed Amendment of Class E
Airspace; Burlington, KS
Federal Aviation
Administration (FAA), DOT.
ACTION: Notice of proposed rulemaking
(NPRM).
AGENCY:
This action proposes to
amend the Class E airspace extending
upward from 700 feet above the surface
at Coffey County Airport, Burlington,
KS. The FAA is proposing this action as
the result of an airspace review caused
by the decommissioning of the Boyd
non-directional beacon (NDB) which
provided navigation information to the
instrument procedures at this airport.
DATES: Comments must be received on
or before October 13, 2020.
ADDRESSES: Send comments on this
proposal to the U.S. Department of
Transportation, Docket Operations,
West Building Ground Floor, Room
W12–140, 1200 New Jersey Avenue SE,
Washington, DC 20590; telephone (202)
366–9826, or (800) 647–5527. You must
identify FAA Docket No. FAA–2020–
0666/Airspace Docket No. 20–ACE–16
at the beginning of your comments. You
may also submit comments through the
internet at https://www.regulations.gov.
You may review the public docket
containing the proposal, any comments
received, and any final disposition in
person in the Dockets Office between
9:00 a.m. and 5:00 p.m., Monday
through Friday, except federal holidays.
FAA Order 7400.11D, Airspace
Designations and Reporting Points, and
subsequent amendments can be viewed
online at https://www.faa.gov/air_
traffic/publications/. For further
information, you can contact the
Airspace Policy Group, Federal Aviation
Administration, 800 Independence
Avenue SW, Washington, DC 20591;
telephone: (202) 267–8783. The Order is
also available for inspection at the
National Archives and Records
Administration (NARA). For
information on the availability of FAA
Order 7400.11D at NARA, email
fedreg.legal@nara.gov or go to https://
www.archives.gov/federal-register/cfr/
ibr-locations.html.
FOR FURTHER INFORMATION CONTACT:
Rebecca Shelby, Federal Aviation
Administration, Operations Support
SUMMARY:
E:\FR\FM\28AUP1.SGM
28AUP1
]]>Agencies
[Federal Register Volume 85, Number 168 (Friday, August 28, 2020)]
[Proposed Rules]
[Pages 53299-53306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19112]
========================================================================
Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
========================================================================
Federal Register / Vol. 85, No. 168 / Friday, August 28, 2020 /
Proposed Rules
[[Page 53299]]
BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2020-0027]
12 CFR Part 1026
CARD Act Rules Review Pursuant to the Regulatory Flexibility Act;
Request for Information Regarding Consumer Credit Card Market
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Regulatory review and request for comments; request for
information regarding consumer credit card market.
-----------------------------------------------------------------------
SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
requesting comment on two related, but separate, reviews. First, the
Bureau is conducting a review of the Credit Card Accountability
Responsibility and Disclosure Act of 2009 (CARD Act) Rules. As part of
this review, the Bureau is seeking comment on the economic impact of
the CARD Act Rules on small entities so that it can determine whether
the rules should be continued without change, or should be amended or
rescinded, consistent with the stated objectives of applicable
statutes, to minimize any significant economic impact of the rules upon
a substantial number of such small entities. Second, the Bureau is
conducting a review of the consumer credit card market, within the
limits of its existing resources available for reporting purposes,
pursuant to the CARD Act, and is seeking comment on a number of aspects
of the consumer credit card market.
DATES: Comments must be received by October 27, 2020.
ADDRESSES: You may submit responsive information and other comments,
identified by Docket No. CFPB-2020-0027 by any of the following
methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Email: [email protected]. Include Docket
No. CFPB-2020-0027 in the subject line of the message.
Hand Delivery/Mail/Courier: Comment Intake--CARD Act Rules
RFA Review and Credit Card Market Review, Bureau of Consumer Financial
Protection, 1700 G Street NW, Washington, DC 20552. Please note that
due to circumstances associated with the COVID-19 pandemic, the Bureau
discourages the submission of comments by hand delivery, mail, or
courier.
Instructions: The Bureau encourages the early submission of
comments. All submissions must include the document title and docket
number. Please note the specific rule or topic on which you are
commenting at the top of each response (you do not need to address all
rules or topics). Because paper mail in the Washington, DC area and at
the Bureau is subject to delay and in light of difficulties associated
with mail and hand deliveries during the COVID-19 pandemic, commenters
are encouraged to submit comments electronically. In general, all
comments received will be posted without change to https://www.regulations.gov. In addition, once the Bureau's headquarters
reopens, comments will be available for public inspection and copying
at 1700 G Street NW, Washington, DC 20552, on official business days
between the hours of 10 a.m. and 5 p.m. eastern time. At that time, you
can make an appointment to inspect the documents by telephoning 202-
435-9169.
All submissions in response to this Request for Information (RFI),
including attachments and other supporting materials, will become part
of the public record and subject to public disclosure. Proprietary
information or sensitive personal information, such as account numbers
or Social Security numbers, or names of other individuals, should not
be included. Submissions will not be edited to remove any identifying
or contact information.
The Bureau is requesting comment on the following two related, but
separate, reviews: (1) The RFA section 610 review; and (2) the CARD Act
section 502(a) review. The Bureau requests that when a commenter makes
a specific comment, the commenter indicates whether that comment
relates to the RFA section 610 review, the CARD Act section 502(a)
review, or both.
FOR FURTHER INFORMATION CONTACT: Yaritza Velez, Counsel, or Krista
Ayoub, Senior Counsel, Office of Regulations, at 202-435-7700. If you
require this document in an alternative electronic format, please
contact [email protected].
SUPPLEMENTARY INFORMATION: The Bureau is requesting comment on two
related, but separate, reviews. Part I sets forth a description of the
review of the Credit Card Accountability Responsibility and Disclosure
Act of 2009 (CARD Act) \1\ Rules (as defined below) that the Bureau is
conducting consistent with section 610 of the Regulatory Flexibility
Act (RFA).\2\ As discussed below, the CARD Act Rules generally affect
credit card issuers and other creditors that offer open-end (not home-
secured) credit plans. The CARD Act Rules also affect certain credit
unions that were offering certain multifeatured plans at the time the
CARD Act Rules were adopted and were separately approving and
underwriting certain advances under those plans. As part of this
review, the Bureau is seeking comment on the economic impact of the
CARD Act Rules on small entities so that the agency can determine
whether the rules should be continued without change, or should be
amended or rescinded, consistent with the stated objectives of
applicable statutes, to minimize any significant economic impact of the
rules upon a substantial number of such small entities.
---------------------------------------------------------------------------
\1\ Public Law 111-24, 123 Stat. 1734 (2009). One purpose of the
CARD Act is to establish fair and transparent practices relating to
the extension of open-end consumer credit plans.
\2\ Public Law 96-354, 94 Stat. 1164 (1980).
---------------------------------------------------------------------------
Part II discusses the review that the Bureau must conduct of the
consumer credit card market every two years under section 502(a) of the
CARD Act.\3\ To inform the Bureau's next review, the Bureau invites
members of the public, including consumers, credit card issuers,
industry analysts, consumer groups, and other interested persons to
submit information and other comments relevant to the issues identified
in part II, as well as any information they believe is relevant to a
review of the credit card market. This review relates to the credit
card market generally, and not just to small entities.
---------------------------------------------------------------------------
\3\ See 15 U.S.C. 1616(a).
---------------------------------------------------------------------------
[[Page 53300]]
The statutory authorities require these reviews, and these are not
triggered by the current, COVID-19 related economic conditions,
although the Bureau recognizes that the information submitted will
reflect those conditions.
The Bureau believes that commenters may benefit from the Bureau
issuing one RFI for the two reviews, because it expects that some
commenters may wish to comment on both reviews and may find some
benefit in commenting on both reviews at the same time. The Bureau
requests that when a commenter makes a specific comment, the commenter
indicates whether that comment relates to the RFA section 610 review,
the CARD Act section 502(a) review, or both.
I. RFA Section 610 Review
The RFA requires each agency to consider the effect on small
entities for certain rules it promulgates.\4\ Specifically, section 610
of the RFA \5\ provides that each agency shall publish in the Federal
Register a plan for the periodic review of the rules issued by the
agency which have or will have a significant economic impact upon a
substantial number of small entities.
---------------------------------------------------------------------------
\4\ The term ``small entity'' is defined in the RFA. See 5
U.S.C. 601(6).
\5\ 5 U.S.C. 610(a).
---------------------------------------------------------------------------
The Bureau has published such a plan in the Federal Register.\6\
Section 610 provides that the purpose of the review is to determine
whether such rules should be continued without change, or should be
amended or rescinded, consistent with the stated objectives of
applicable statutes, to minimize any significant economic impact of the
rules upon a substantial number of such small entities.\7\ As also set
forth in section 610, in each review the Bureau will consider several
factors:
---------------------------------------------------------------------------
\6\ 84 FR 21732 (May 15, 2019).
\7\ 5 U.S.C. 610(a).
---------------------------------------------------------------------------
1. The continued need for the rule;
2. The nature of public complaints or comments on the rule;
3. The complexity of the rule;
4. The extent to which the rule overlaps, duplicates, or conflicts
with Federal, State, or other rules; and
5. The time since the rule was evaluated or the degree to which
technology, market conditions, or other factors have changed the
relevant market.\8\
---------------------------------------------------------------------------
\8\ 5 U.S.C. 610(b).
---------------------------------------------------------------------------
A. CARD Act Rules
This section lists and briefly describes the rules that the Bureau
plans to review in 2020 under the criteria described by section 610 of
the RFA and pursuant to the Bureau's review plan.\9\
---------------------------------------------------------------------------
\9\ 84 FR 21732 (May 15, 2019).
---------------------------------------------------------------------------
1. The Rules
From July 2009 to April 2011, the Board of Governors of the Federal
Reserve System (Board) published an interim final rule \10\ and three
final rules,\11\ primarily to implement a number of substantive and
disclosure provisions required by the CARD Act. This document
collectively refers to these four rules as the ``CARD Act Rules.'' \12\
The CARD Act Rules amended Regulation Z, which implements the Truth in
Lending Act (TILA),\13\ and the official staff commentary to the
regulation, which interprets the requirements of Regulation Z.\14\ The
Board issued the CARD Act Rules pursuant to its authority under section
2 of the CARD Act \15\ and TILA sections 105(a) and (f), 127(c)(5),
143, 148(d), and 149(b).\16\
---------------------------------------------------------------------------
\10\ 74 FR 36077 (July 22, 2009).
\11\ 75 FR 7658 (Feb. 22, 2010); 75 FR 37526 (June 29, 2010); 76
FR 22948 (Apr. 25, 2011).
\12\ The CARD Act Rules also implemented the Credit CARD
Technical Corrections Act of 2009. Public Law 111-93, 123 Stat. 2998
(2009); 75 FR 7658 (Feb. 22, 2010).
\13\ 15 U.S.C. 1601 et seq.
\14\ The CARD Act Rules were originally adopted by the Board in
12 CFR part 226 but, upon transfer of authority by the Dodd-Frank
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) to
implement TILA to the Bureau, were renumbered as 12 CFR part 1026.
76 FR 79768 (Dec. 22, 2011); see also 81 FR 25323 (Apr. 28, 2016).
The Bureau subsequently amended some of the provisions in the CARD
Act Rules. See, e.g., 78 FR 18795 (Mar. 28, 2013); 78 FR 25818 (May
3, 2013).
\15\ Section 2 of the CARD Act states that the Board ``may issue
such rules and publish such model forms as it considers necessary to
carry out this Act.'' Public Law 111-24, 123 Stat. 1734 (2009).
\16\ 15 U.S.C. 1604(a) and (f), 1637(c)(5), 1663, 1665c, and
1665d.
---------------------------------------------------------------------------
Many of the provisions in the CARD Act Rules apply to a ``card
issuer,'' as defined in Sec. 1026.2(a)(7),\17\ that extends credit
under a ``credit card account under an open-end (not home-secured)
consumer credit plan,'' as defined in Sec. 1026.2(a)(15)(ii). Among
other things, the CARD Act Rules contain provisions to implement the
CARD Act that: (1) Prohibit card issuers from extending credit without
assessing the consumer's ability to pay, with special rules regarding
the extension of credit to persons under the age of 21; \18\ (2)
restrict the amount of required fees that a card issuer can charge
during the first year after an account is opened; \19\ (3) limit the
amount card issuers can charge for penalty fees, such as when a
consumer makes a late payment or exceeds his or her credit limit; \20\
(4) restrict the circumstances under which card issuers can increase
interest rates and certain fees on credit card accounts, and require
subsequent reevaluations of rate increases; \21\ (5) restrict fees for
over-the-limit transactions to one per billing cycle and require that
the consumer opt in to payment of such transactions in order for the
fee to be charged; \22\ (6) restrict how payments in excess of the
minimum payment may be allocated; \23\ and (7) require card issuers to
submit to the Bureau agreements for open-end consumer credit card
plans, and agreements with institutions of higher education (or an
affiliated organization) regarding the issuance of credit cards to
students at that institution.\24\
---------------------------------------------------------------------------
\17\ See also 15 U.S.C. 1602(o).
\18\ 12 CFR 1026.51.
\19\ 12 CFR 1026.52(a).
\20\ 12 CFR 1026.52(b).
\21\ 12 CFR 1026.55 and 1026.59.
\22\ 12 CFR 1026.56.
\23\ 12 CFR 1026.53.
\24\ 12 CFR 1026.57(d) and 1026.58(c). The CARD Act Rules also
contained the following other provisions to implement the CARD Act:
(1) Sec. 1026.5(a)(2)(iii); (2) Sec. 1026.5(b)(2)(ii)(A) and (B);
(3) Sec. 1026.7(b)(11) and (12); (4) Sec. 1026.9(c)(2), (e), (g),
and (h); (5) Sec. 1026.10(b)(2)(ii), (b)(3), (d), (e), and (f); (6)
Sec. 1026.11(c); (7) Sec. 1026.16(f); (8) Sec. 1026.57(a) through
(c); and (9) Sec. 1026.58(a) through (b) and (d) through (g).
---------------------------------------------------------------------------
In addition to the provisions that implement the CARD Act, the CARD
Act Rules also incorporated provisions of (1) a final rule amending
Regulation Z that the Board adopted in January 2009 (January 2009
Regulation Z Rule); \25\ and (2) the Board's final rule amending
Regulation AA under the Federal Trade Commission Act (FTC Act) \26\ to
protect consumers from unfair acts or practices with respect to
consumer credit card accounts (January 2009 FTC Act Rule).\27\ The CARD
Act Rules generally incorporated these provisions, with revisions as
applicable to be consistent with the CARD Act.\28\ The CARD Act Rules
also generally finalized provisions of the Board's proposed rules to
provide clarifications and technical amendments to the January 2009
Regulation Z Rule and the January 2009 FTC Act Rule (May 2009 Proposed
Rules), with revisions as
[[Page 53301]]
applicable to be consistent with the CARD Act.\29\
---------------------------------------------------------------------------
\25\ 74 FR 5244 (Jan. 29, 2009).
\26\ 15 U.S.C. 41-58.
\27\ See 74 FR 5498 (Jan. 29, 2009). The Board issued this final
rule jointly with similar rules issued by the Office of Thrift
Supervision (OTS) and the National Credit Union Administration
(NCUA).
\28\ 74 FR 54124, 54125 (Oct. 21, 2009); 75 FR 7658, 7659 (Feb.
22, 2010). Because the Board incorporated the provisions of the
January 2009 Regulation Z Rule and the January 2009 FTC Act Rule, as
amended, into the CARD Act Rules, the Board withdrew the January
2009 Regulation Z Rule and the January 2009 FTC Act Rule. 75 FR 7925
(Feb. 22, 2010).
\29\ 74 FR 20784 (May 5, 2009); 74 FR 20804 (May 5, 2009).
---------------------------------------------------------------------------
The Board adopted the January 2009 Regulation Z Rule following a
comprehensive review of TILA's rules for open-end (revolving) credit
that is not home-secured. The January 2009 Regulation Z Rule amended
many of the Regulation Z provisions that apply to open-end credit,
including those in subparts A (General) and B (Open-end Credit),
appendix G, and related commentary. The January 2009 Regulation Z Rule
was designed, in part, to improve the effectiveness of the disclosures
that ``creditors,'' as defined in Sec. 1026.2(a)(17),\30\ must provide
under Regulation Z to consumers at application and throughout the life
of an open-end account.\31\ The January 2009 Regulation Z Rule
provisions, as amended, that the Board incorporated into the CARD Act
Rules, included changes to the format, timing, and content requirements
for the five main types of disclosures for open-end credit governed by
Regulation Z: (1) Credit and charge card application and solicitation
disclosures; \32\ (2) account-opening disclosures; \33\ (3) periodic
statement disclosures; \34\ (4) subsequent notices such as change-in-
terms notices; \35\ and (5) advertising provisions.\36\ These revisions
to the disclosure provisions generally affect creditors that offer
open-end (not home-secured) credit plans (including credit card
accounts and open-end plans that are not credit card accounts such as
overdraft lines of credit and other personal lines of credit), and
persons advertising open-end (not home-secured) credit, whether or not
they are creditors.\37\
---------------------------------------------------------------------------
\30\ See also 15 U.S.C. 1602(g).
\31\ One purpose of TILA is to promote the informed use of
consumer credit by providing for disclosures about its terms and
cost. 15 U.S.C. 1601(a).
\32\ 12 CFR 1026.60.
\33\ 12 CFR 1026.6(b).
\34\ 12 CFR 1026.7(b).
\35\ 12 CFR 1026.9(c)(2) and (g).
\36\ 12 CFR 1026.16.
\37\ 74 FR 5244, 5249, 5391 (Jan. 29, 2009).
---------------------------------------------------------------------------
Among other things, the CARD Act Rules also incorporated provisions
from the January 2009 Regulation Z Rule that revised commentary to the
definition of ``open-end credit,'' as defined in Sec.
1026.2(a)(20).\38\ These revisions clarified that advances that are
separately underwritten are generally not open-end credit but closed-
end credit for which closed-end disclosures must be given.\39\ The
Board expected these revisions to primarily impact certain credit
unions that were at that time offering certain multifeatured plans and
were separately approving and underwriting certain advances under those
plans.\40\
---------------------------------------------------------------------------
\38\ See also 15 U.S.C. 1602(j).
\39\ Comment 2(a)(20)-5.
\40\ 74 FR 5244, 5258-60, 5391 (Jan. 29, 2009).
---------------------------------------------------------------------------
The January 2009 FTC Act Rule contained provisions that are similar
to several of those adopted in the CARD Act.\41\ The January 2009 FTC
Act Rule was designed to protect consumers from unfair acts or
practices with respect to consumer credit card accounts, including (1)
requiring institutions to provide consumers with a reasonable amount of
time to make a payment before the institution can consider the consumer
late in making that payment; (2) requiring institutions to allocate
amounts paid in excess of the minimum payment in specified ways; (3)
restricting institutions from increasing rates on existing balances
except in specified circumstances; (4) prohibiting institutions from
imposing finance charges based on balances for days in billing cycles
that precede the most recent billing cycle as a result of the loss of a
grace period; and (5) limiting the amount of fees for the issuance or
availability of credit that institutions may charge to an account
during the first year after account opening. The CARD Act Rules
generally incorporated these provisions, with revisions as applicable
to be consistent with the CARD Act.
---------------------------------------------------------------------------
\41\ See 75 FR 7658, 7661-62, 7666-67 (Feb. 22, 2010).
---------------------------------------------------------------------------
The May 2009 Proposed Rules generally proposed clarifications and
technical amendments to the January 2009 Regulation Z Rule and the
January 2009 FTC Act Rule. The Board proposed these clarifications to
resolve confusion regarding how institutions would comply with
particular aspects of those rules. The proposed amendments to the
January 2009 Regulation Z Rule also included several proposed
provisions applicable to deferred interest plans, such as plans that
permit a consumer to avoid interest charges if a purchase balance is
paid in full by a certain date.\42\ The CARD Act Rules generally
finalized the provisions in the May 2009 Proposed Rules, with revisions
as applicable to be consistent with the CARD Act.
---------------------------------------------------------------------------
\42\ 74 FR 20784, 20786-87, 20788-91 (May 5, 2009); see also 12
CFR 1026.7(b)(14) and 1026.16(h).
---------------------------------------------------------------------------
The Bureau recodified Regulation Z, including the amendments made
by the CARD Act Rules, in 2011 when the Bureau assumed rulemaking
responsibility under TILA.\43\
---------------------------------------------------------------------------
\43\ 76 FR 79768 (Dec. 22, 2011); see also 81 FR 25323 (Apr. 28,
2016).
---------------------------------------------------------------------------
2. The Market
As discussed above in part I.A.1, the CARD Act Rules primarily
apply to credit card accounts and other open-end (not home-secured)
products. The Bureau has monitored the credit card market generally,
including through biennial reviews and submission of reports to
Congress pursuant to section 502 of the CARD Act.\44\ To date, the
Bureau has issued four reports pursuant to that obligation--in 2013,
2015, 2017, and 2019 (collectively, the Reports).\45\ Several of these
Reports have examined changes in the credit card market since the CARD
Act Rules became effective, although data have generally not been
available to evaluate changes specific to small entities in a
comparable level of detail as was possible for large entities.\46\
---------------------------------------------------------------------------
\44\ See 15 U.S.C. 1616.
\45\ See Bureau of Consumer Fin. Prot., CARD Act Report, (Oct.
1, 2013) (2013 Report), https://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf; Bureau of Consumer Fin. Prot., The
Consumer Credit Card Market, (Dec. 2015) (2015 Report), https://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf; Bureau of Consumer Fin. Prot., The Consumer Credit
Card Market, (Dec. 2017) (2017 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf; Bureau of Consumer Fin. Prot., The Consumer
Credit Card Market, (Aug. 2019) (2019 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.pdf.
\46\ See 2017 Report at 19 n.13.
---------------------------------------------------------------------------
a. Credit Card Market
i. Market Structure and Participants
The credit card market is one of the United States' largest
consumer financial markets, with nearly 170 million Americans having at
least one credit card and collectively carrying nearly $1 trillion in
total credit card debt.\47\ The market has been growing in recent years
by most measures, with diverse participation from the largest banks to
small community banks, from credit unions to non-bank program managers,
and from servicers to fintech startups. The market is highly
concentrated, with the 10 largest issuers consistently representing the
majority of total credit card balances, while many smaller providers
account for a smaller share of balances.
---------------------------------------------------------------------------
\47\ See 2019 Report at 6, 11.
---------------------------------------------------------------------------
In 2010, there were 4,642 banks, thrifts, and credit unions that
offered credit cards and as a result were affected by the CARD Act.\48\
Of these affected
[[Page 53302]]
entities, 4,044 were small entities as defined by the current SBA
threshold of $600 million or less in total assets.\49\ The trend toward
bank and credit union consolidation was present prior to the CARD Act
and has continued, which has reduced the number of small entities
participating in the credit card market. As of 2019, 4,305 banks,
thrifts, and credit unions offered credit cards, of which 3,437 were
considered small entities.\50\
---------------------------------------------------------------------------
\48\ This analysis considers data reported through the Federal
Financial Institutions Examination Council (FFIEC) Call Report and
NCUA Call Report to determine the number of banks, thrifts, and
credit unions that participate in the credit card market. Call
Report data are matched to data on institution characteristics and
banking structure from the Board's National Information Center.
Prior to the first quarter of 2012, thrifts were not required to
file a Call Report, likely resulting in an underestimate of the
number of thrifts operating in the credit card market prior to 2012.
To determine whether an entity is considered small according to the
Small Business Administration (SBA) definition, this analysis uses
average assets across the calendar year.
\49\ U.S. Small Bus. Admin., Table of Small Business Size
Standards Matched to North American Industry Classification System
Codes, effective Aug. 19, 2019, Sector 52 (Finance and Insurance),
https://www.sba.gov/document/support--table-size-standards.
\50\ Other potentially affected small entities include non-
depository institutions that issue credit cards, though data are
currently too limited to assess the number of such entities.
---------------------------------------------------------------------------
Consumer credit cards generally can be divided into two distinct
segments: general purpose cards and private label cards. General
purpose cards are credit cards that can be used to purchase goods and
services at a wide range of merchants. These cards display the brand of
a major payment card network, most commonly American Express, Discover,
Mastercard, or Visa. General purpose cards are offered by many banks,
credit unions, and community banks. Some card issuers specialize in
offering credit cards to consumers with subprime credit scores, while
others may offer credit cards to consumers with prime or non-prime
scores.
In contrast, private label cards--sometimes called ``store
cards''--do not carry a network brand. Consumers can use these cards
only at the particular merchant or affiliated group of merchants
associated with the card. This segment is highly concentrated, with
only a handful of providers representing the overwhelming share of
private label credit card balances. Deferred interest is a notable
feature with this kind of card.
ii. Credit Card Pricing Structure and Credit Availability
Credit card pricing is fairly complex and involves different
components, such as interest rates and fees. The cost to the consumer
also depends on a number of consumer-dependent factors, such as the
cardholder's creditworthiness, usage of features and rewards, and
repayment behavior.
Consumers who utilize a credit card may pay for that credit in a
number of different ways. Consumers may be charged an annual (or
monthly) fee. They may incur penalty fees if they violate the account
terms, most commonly by making a payment late. They may be charged a
variety of other fees relating to specific features or usages of the
account, such as cash advance fees, balance transfer fees, or foreign
transaction fees. Finally, consumers may pay interest charges if, for
example, consumers carry a balance from month-to-month or utilize a
cash advance.
As discussed above, pursuant to the CARD Act,\51\ the Bureau has
published four Reports detailing its reviews of the state of the credit
card market in which it examines, among other things, the cost and
availability of card credit and recent innovations in the market.
Several of these Reports have also examined changes in the credit card
market since the CARD Act Rules became effective, although data have
generally not been available to evaluate changes specific to small
entities in a comparable level of detail as was possible for large
entities.\52\ The Bureau's Reports observed the following changes in
terms of credit card pricing following the implementation of the CARD
Act: (1) Over-the-limit fees declined sharply, to a nearly non-existent
level, after the effective date of the CARD Act opt-in rule in February
2010; (2) The average late fee declined from the fourth quarter of 2009
to the same quarter in 2010, following the effective date of the CARD
Act Rules' safe harbors for penalty fee amounts; (3) There has been an
increase in the amount and prevalence of annual fees following the CARD
Act's implementation; \53\ and (4) The total fees, as a share of cycle
ending balance, however, were 180 basis points (43 percent) lower in
the fourth quarter of 2010 than the same quarter of 2008, prior to the
implementation of the CARD Act. This effect was most noticeable for the
deep subprime segment, which may be correlated with the 25 percent fee
cap for cards in their first year as set forth in the CARD Act.
---------------------------------------------------------------------------
\51\ 15 U.S.C. 1616.
\52\ See 2017 Report at 19 n.13.
\53\ Rewards cards may be a reason for the increase in credit
card annual fees. See 2019 Report at 12. Credit card rewards
programs have rapidly increased in prevalence over the past decade.
Issuers are offering a greater diversity of rewards programs--and in
many cases more compelling value propositions--to match the
increasing popularity of these products with consumers. For many
consumers, rewards have become central to the decision of which
credit cards to acquire and how to use them. See 2015 Report at 263;
2017 Report at 60; 2019 Report at 100-101.
---------------------------------------------------------------------------
In addition, the Reports also found that, beginning in the first
quarter of 2009 and continuing through the second quarter of 2010, the
first full quarter after most of the provisions of the CARD Act took
effect in February 2010, the account-weighted average retail annual
percentage rate (APR) \54\ increased by 230 basis points. The increase
was more modest among accounts with deep subprime credit scores and
highest among accounts held by consumers with prime and superprime
credit scores. However, for accounts with deep subprime credit scores,
the effective interest rate fell by 200 basis points from the fourth
quarter of 2008 to the same quarter in 2012, with much of that decline
occurring during the period prior to when most of the CARD Act
provisions became effective in February 2010 when retail APRs were
increasing. Also, the incidence of repricing \55\ has come down
significantly and has remained at very low levels since the CARD Act's
February 2010 effective date of limitations on repricing activity.
---------------------------------------------------------------------------
\54\ Discussions of credit card interest rates often focus on
the APR as it is the interest rate charged on balances (the ``retail
APR''). The APR is often used as shorthand for expressing the costs
associated with using a credit card. However, for several reasons,
the retail APR may not provide an accurate indication of the
effective interest rates paid by consumers. The effective interest
rate is defined as total interest charges for a period of time,
stated as a percent of average cycle-ending balance for the same
period of time. 2013 Report at 29.
\55\ Repricing is a practice in which an issuer increases a
consumer's APR.
---------------------------------------------------------------------------
The Reports also found changes related to credit availability.
First, the Reports found that there has been a reduction in the
availability of credit for consumers with subprime scores as well as
for students and young adults, the latter a direct effect of the CARD
Act's restrictions on issuing cards to students and individuals under
the age of 21. Second, a small but discernible percentage of applicants
that issuers deemed otherwise creditworthy were declined as a result of
insufficient income to satisfy the CARD Act's ability-to-pay
requirement. Third, there has been a marked decline in the percentage
of consumers receiving credit line increases on their accounts, also
possibly due to the ability-to-pay requirement. Fourth, the Bureau
reviewed evidence that suggested issuers might be using line management
as a means of responding to revealed risk post-origination, in place of
repricing balances in ways restricted by the CARD Act.
[[Page 53303]]
The Bureau's 2019 Report included a review of academic scholarship
examining the CARD Act's effects. In many cases, these academic
analyses corroborate the Bureau's findings from prior years' card
market reports including, for example, findings that the CARD Act led
to reductions in consumers' total payments toward certain fees such as
late fees and over-limit fees. However, across the methodologies and
analyses reviewed, a consistent theme is the challenge of disentangling
the effects of the CARD Act itself, rather than the effects of other
market changes such as the Great Recession. Overall, the scholarship
review suggests that the CARD Act's effect on consumer welfare is
mixed, with some scholarship suggesting the CARD Act may have had
unintended consequences.\56\
---------------------------------------------------------------------------
\56\ See 2019 Report at 13.
---------------------------------------------------------------------------
iii. Other Developments and Innovation
The Reports also discuss new developments and innovation in the
credit card market since the CARD Act Rules became effective. The
following section discusses: (1) Credit card agreements; (2) use of
digital account servicing platforms; (3) new fixed payment features
being offered; and (4) credit card payment rates.
The Bureau's 2013 Report found that credit card agreements became
simpler and shorter after the CARD Act Rules became effective.\57\
However, the Bureau's 2015 Report noted that card agreements became
longer, but not more complex, from 2012 to 2014.\58\ The Bureau's 2017
Report noted declines in the complexity level of credit card pricing
disclosures from 2009 to 2010, and that the level of complexity had
remained stable.\59\ These agreements remain complex documents.
---------------------------------------------------------------------------
\57\ 2013 Report at 5, 63-66.
\58\ 2015 Report at 119-23.
\59\ See 2017 Report at 195-205.
---------------------------------------------------------------------------
Consumers are increasingly relying on digital account servicing
platforms, such as websites or mobile applications, where consumers can
view and manage account activity. As of 2018, 78 percent of active
accounts were enrolled in online portals for general purpose cards, as
compared to 55 percent in 2014.\60\ The share of accounts held by
consumers who opt out of paper billing statements has risen by more
than one-third since 2014,\61\ and the share of accounts held by
consumers who make payments against their accounts using digital
channels has risen from 38 percent reported in 2013 \62\ to 55 percent
in 2018.\63\
---------------------------------------------------------------------------
\60\ 2019 Report at 48.
\61\ 2019 Report at 49.
\62\ 2013 Report at 68.
\63\ 2019 Report at 53.
---------------------------------------------------------------------------
A few issuers have begun offering a feature that leverages a card's
existing credit line to provide a fixed repayment plan that is separate
from payments made toward the revolving balance on the account. Issuers
have implemented a variety of these types of payment options into the
card servicing platform for easier signup. New flexible payment
features of credit card accounts fall into two categories: those that
provide a payment plan for existing purchases and those that provide a
payment plan for future purchases.\64\
---------------------------------------------------------------------------
\64\ Id. at 177.
---------------------------------------------------------------------------
Fixed payment plans for existing purchases allow certain individual
purchases made on a credit card to be paid off using fixed monthly
payments over a set period of time. Issuers that offer this type of
feature let consumers select eligible transactions through the card's
mobile app or online portal for fixed monthly payments. The issuers'
products (or announced products) differ slightly but, in general,
purchases over a certain dollar threshold are eligible.\65\
---------------------------------------------------------------------------
\65\ Id. at 178.
---------------------------------------------------------------------------
Credit repayment flexibility is not new, but today's options differ
in their use of credit card mobile apps. One issuer launched a credit
card balance management platform in 2009, but it was delivered
separately from the primary account interaction. Today's repayment
flexibility products are presented to the consumer in the flow of
viewing his or her transaction history. Eligible transactions are
denoted with an icon that links to the product terms. A range of
repayment periods and corresponding costs are offered (e.g., three
payments, six payments, or 12 payments). In addition, one issuer
provides a corresponding feature through which cardholders may pay down
the account balance in an amount equal to a specific transaction's
dollar amount.\66\
---------------------------------------------------------------------------
\66\ Id.
---------------------------------------------------------------------------
The second set of flexible repayment options for credit card
accounts consists of features that provide a payment plan for purchases
yet to be made. Multiple issuers offer cardholders the opportunity to
receive a cash disbursement from an unused portion of their credit
line, which is repaid in equal monthly payments over a set period of
time. These initiatives allow the issuers to increase consumer use of
portions of credit line that are not currently being used. A card
issuer may offer this feature to cardholders that meet certain basic
eligibility checks, such as satisfactory payment history on the card
and meaningful unused line size. Cardholders may be able to select
different lengths of repayment, depending on their eligibility. The
transactions extended under this feature are repaid using equal monthly
payments for a set period of time.\67\
---------------------------------------------------------------------------
\67\ Id. at 179.
---------------------------------------------------------------------------
These fixed payment plans and their structures involve a broad
array of regulatory provisions adopted in the CARD Act Rules, such as
limitations on APR and fee increases, payment allocation rules, and
ability to pay.\68\
---------------------------------------------------------------------------
\68\ Id.
---------------------------------------------------------------------------
Credit card payment rates have been increasing since 2010, as
measured by total payments as a share of total statement balances. It
is unclear precisely what combination of factors has contributed to
this change. However, increases in payment rates have coincided with
some of the regulatory changes created by the CARD Act, such as clearer
due dates, new ability-to-pay rules, and payment disclosure
requirements, along with the improvement in macroeconomic conditions
and changes in consumer profiles.\69\
---------------------------------------------------------------------------
\69\ See 2015 Report at 49-50.
---------------------------------------------------------------------------
b. Other Open-End (Not Home-Secured) Products
As discussed in part I.A.1, the CARD Act Rules include some
provisions that apply to open-end (not home-secured) plans generally,
including open-end plans that are not credit card accounts, such as
overdraft lines of credit and other personal lines of credit. The
Bureau is aware, through its market monitoring function, of the growth
of open-end personal lines of credit. Several non-depository lenders
offer small-dollar open-end personal lines of credit in amounts ranging
from approximately $500 to $4,500. Some States specifically authorize
personal small-dollar lines of credit. For example, the Tennessee
Flexible Credit Act allows licensed lenders to make open-end lines of
credit, unsecured or secured by personal property, with an outstanding
principal balance of no more than $4,000.\70\ Even with this market
monitoring, the Bureau does not know with certainty the total number of
small entities that offer open-end (not home-secured) products that are
not credit card accounts. Individuals and businesses may extend small
amounts of consumer credit covered by TILA and
[[Page 53304]]
Regulation Z without the Bureau's awareness.\71\
---------------------------------------------------------------------------
\70\ Tenn. Code Ann. sec. 45-12-101, 45-12-102, and 45-12-111.
\71\ See 12 CFR 1026.1(c)(1). Regulation Z generally applies to
each individual or business that offers or extends credit when four
conditions are met: (i) The credit is offered or extended to
consumers; (ii) the offering or extension of credit is done
regularly; (iii) the credit is subject to a finance charge or is
payable by a written agreement in more than four installments; and
(iv) the credit is primarily for personal, family, or household
purposes.
---------------------------------------------------------------------------
As discussed in part I.A.1, the CARD Act Rules also had an impact
on certain multifeatured plans that were being offered by credit unions
at the time the CARD Act Rules were adopted. Some reports suggest these
plans were offered by over 3,000 credit unions prior to the adoption of
the CARD Act Rules,\72\ with others citing a number just under
2,000,\73\ although more recent data appear to be unavailable.
---------------------------------------------------------------------------
\72\ Nicole Kellner-Swick & Ashley L. Sweeney, Multi-Featured
Open-End Lending: The Past, Present and Future, That Credit Union
Blog (Jan. 23, 2013), https://thatcreditunionblog.wordpress.com/2013/01/23/multi-featured-open-end-lending-the-past-present-and-future/; Michelle A. Samaad, Open-End Lending Drop Blamed on Regs,
Confusion, Credit Union Times (Aug. 5, 2012), https://www.cutimes.com/2012/08/05/open-end-lending-drop-blamed-on-regs-confusion/?slreturn=20180603145338.
\73\ In response to the initial regulatory flexibility analysis
in relation to the January 2009 Regulation Z Rule, a commenter that
provides insurance and related financial services to credit unions
reported that based on internal records, over 1,900 credit unions
with assets under $50 million and that offer multifeatured plans
would incur an average cost of $100,000 per credit union to switch
to closed-end disclosures if clarifications related to the
definition of open-end credit were adopted as proposed. 74 FR 5244,
5391 (Jan. 29, 2009).
---------------------------------------------------------------------------
The NCUA in July 2012 issued a supervisory letter to provide
guidance to federal credit unions on a permissible blended approach to
multifeatured lending that is consistent with the CARD Act Rules.\74\
In preparing this letter, NCUA consulted with the Bureau on the
interpretation of Regulation Z as it relates to multifeatured open-end
lending. Among other things, this letter discussed a permissible
blended approach to multifeatured lending that has a single loan
agreement with both open-end and closed-end credit subaccounts. NCUA
indicated that this blended approach is consistent with Regulation Z,
provided the credit union complies with the requirements under 12 CFR
part 1026, subpart B for open-end credit and 12 CFR part 1026, subpart
C, for each closed-end loan transaction under the single plan.
---------------------------------------------------------------------------
\74\ Nat'l Credit Union Admin., Multi-Featured Open-End Lending
(MFOEL) (July 2012), https://www.ncua.gov/regulation-supervision/letters-credit-unions-other-guidance/multi-featured-open-end-lending-mfoel-0.
---------------------------------------------------------------------------
3. Bureau Resources and Analysis
Since 2011, the Bureau has published various reports and other
materials about the credit card market. As discussed in part I.A.2 and
pursuant to the CARD Act, the Bureau has published four Reports
detailing its reviews of the state of the credit card market in which
it examines, among other things, the cost and availability of card
credit and recent innovations in the market. In 2011, the Bureau
published findings from a Bureau-convened conference on the effects of
the CARD Act.\75\ Pursuant to the CARD Act,\76\ the Bureau publishes
annually a report that discusses agreements between card issuers and
institutions of higher education (or certain organizations affiliated
with such institutions) in connection with the issuance of credit
cards. To date, the Bureau has published eight of these reports.\77\
Other Bureau reports specific to the credit card market have generally
focused on consumer behaviors in the market, including end-of-year
credit card borrowing and patterns of revolving and repayment.\78\
---------------------------------------------------------------------------
\75\ See Press Release, Bureau of Consumer Fin. Prot., CFPB
Launches Public Inquiry on the Impact of the Card Act (Dec. 19,
2012), https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-public-inquiry-on-the-impact-of-the-card-act/.
\76\ 15 U.S.C. 1637(r)(3).
\77\ Bureau of Consumer Fin. Prot., Student banking reports to
Congress, https://www.consumerfinance.gov/data-research/student-banking/student-banking-reports-congress/(last visited July 29,
2020). The Board published two such reports subsequent to the
passage of the CARD Act but prior to the transfer of this CARD Act
mandate to the Bureau.
\78\ See Bureau of Consumer Fin. Prot., Quarterly consumer
credit trends: End-of-year credit card borrowing (June 2018),
https://www.consumerfinance.gov/data-research/research-reports/quarterly-consumer-credit-trends-end-year-credit-card-borrowing/;
Bureau of Consumer Fin. Prot., Data point: Credit card revolvers
(July 2019), https://www.consumerfinance.gov/data-research/research-reports/data-point-credit-card-revolvers/.
---------------------------------------------------------------------------
Pursuant to the CARD Act and TILA, the Bureau collects various
information from card issuers. The Bureau collects credit card
agreements from card issuers on a quarterly basis.\79\ The Bureau
publishes the agreements on its website in the credit card agreement
database.\80\ In addition, the Bureau collects annually and publishes
on its website college credit card marketing agreement data and credit
card issuers' marketing agreements with colleges, universities, and
their affiliates, as well as the number of cards covered by, and the
amount of payments made by issuers under these agreements.\81\ The
Bureau also collects information semi-annually from certain card
issuers through its terms of credit card plans (TCCP) survey and
publishes these data on its website.\82\ These data show features of
the most commonly held (i.e., modal) credit card for issuers that
report such information. Other previously collected data include the
credit card database, which shows monthly account-level aggregates for
credit cards from several large issuers, and surveys of several credit
card issuers including questions regarding card application and
approval, digital account servicing, deferred interest, and loan
performance.\83\ Other data similar to these monthly account-level
aggregates are also shared with the Bureau via memoranda of
understanding (MOUs) with other bank regulators.
---------------------------------------------------------------------------
\79\ 15 U.S.C. 1632(d)(2) and (3).
\80\ Bureau of Consumer Fin. Prot., Credit card agreement
database, https://www.consumerfinance.gov/credit-cards/agreements/
(last visited July 29, 2020).
\81\ 15 U.S.C. 1637(r)(2); Bureau of Consumer Fin. Prot.,
College credit card marketing agreements and data, https://www.consumerfinance.gov/data-research/student-banking/marketing-agreements-and-data/ (last visited July 29, 2020).
\82\ 15 U.S.C. 1646; Bureau of Consumer Fin. Prot., Terms of
credit card plans (TCCP) survey, https://www.consumerfinance.gov/data-research/credit-card-data/terms-credit-card-plans-survey/ (last
visited July 29, 2020).
\83\ 12 U.S.C. 5512(c)(4).
---------------------------------------------------------------------------
4. Previous Input to the Bureau
In 2011, the Bureau issued an RFI related to streamlining
regulatory requirements (2011 RFI).\84\ The 2011 RFI asked the public
to identify provisions of the inherited regulations that the Bureau
should make the highest priority for updating, modifying, or
eliminating because they are outdated, unduly burdensome, or
unnecessary. The 2011 RFI also discussed several specific requirements
that may warrant review, such as the ability-to-pay rules. It also
sought suggestions for practical measures to make complying with the
regulations easier. The Bureau received around 10 letters that included
information about credit card accounts and open-end (not home-secured)
credit generally. These comments came from a variety of stakeholders,
including trade groups and other market participants, card issuers, and
consumer advocacy groups.
---------------------------------------------------------------------------
\84\ 76 FR 75825 (Dec. 5, 2011).
---------------------------------------------------------------------------
Also, as discussed in part I.A.2 and pursuant to the CARD Act, the
Bureau has published four biennial Reports on the state of the credit
card market that examine, among other things, the cost and availability
of card credit and recent innovations in the market. In connection with
these Reports, the CARD Act requires the Bureau to ``solicit comment
from consumers, credit card issuers, and other interested parties.''
\85\ For each of the four Reports,
[[Page 53305]]
the Bureau has done so through a RFI published in the Federal
Register.\86\ In these RFIs, the Bureau sought comment on various
topics, including the terms of credit card agreements and practices of
credit card issuers, the effectiveness of credit card disclosures, the
adequacy of protection from unfair or deceptive acts or practices,
whether the CARD Act affects the cost and availability of credit,
whether the CARD Act has had an impact on issuer safety and soundness,
whether the CARD Act had any effect on the use of risk-based pricing,
and whether the CARD Act had any impact on credit card innovation. In
response to the RFIs, comments were submitted by a variety of
stakeholders, including trade groups representing credit card issuers
and other market participants, card issuers, other industry-side market
participants, individual consumers, and consumer advocacy groups. Each
of the four Reports discussed the comments received, as applicable, in
response to the relevant RFI.
---------------------------------------------------------------------------
\85\ 15 U.S.C. 1616(b).
\86\ 77 FR 75410 (Dec. 20, 2012); 80 FR 14365 (Mar. 19, 2015);
82 FR 13313 (Mar. 10, 2017); 84 FR 647 (Jan. 31, 2019).
---------------------------------------------------------------------------
The Bureau also received information about credit card accounts and
open-end (not home-secured) credit generally in response to the
Bureau's 2018 Call for Evidence Initiative, which included requesting
input on all inherited regulations and rulemaking authorities.\87\ The
Bureau received 13 comments that included information about credit card
accounts and open-end (not home-secured) credit generally. These
comments came from a variety of stakeholders, including trade groups
representing credit card issuers and other market participants, card
issuers, and consumer advocacy groups.
---------------------------------------------------------------------------
\87\ 83 FR 12881 (Mar. 26, 2018).
---------------------------------------------------------------------------
Through the RFIs discussed above, market monitoring, and other
measures, the Bureau has heard concerns expressed by some card issuers
and trade groups about several of the CARD Act Rules' provisions and
how they apply to credit card accounts, such as concerns about (1)
application, account-opening, periodic statement, and advertising
disclosure rules; (2) format and font size requirements for
disclosures; (3) change-in-terms notice and penalty rate notice
requirements; (4) billing error rights and procedures; (5) ability-to-
pay requirements; (6) restrictions on rate and fee increases; (7)
restrictions on certain fees imposed during the first year after
account opening; (8) restrictions on penalty fees; (9) rules for
reevaluating rate increases; (10) restrictions on how payments may be
allocated; and (11) submission of account agreements to the Bureau.
The Bureau's experience suggests there is little overlap,
duplication, or conflict between the CARD Act Rules and Federal, State,
or other rules. The Bureau has not received any requests for a
determination that the CARD Act Rules preempt State law.
B. Request for Comment
Consistent with the section 610 review plan, the Bureau asks the
public to comment on the CARD Act Rules, including the following
topics:
(1) The current scale of the economic impacts of the rules as a
whole on small entities and of their major components on small
entities, including impacts on reporting, recordkeeping, and other
compliance requirements.
(2) Whether and how those impacts on small entities could be
reduced, consistent with the stated objectives of applicable statutes
and the rules.
(3) Current information relevant to the factors that the Bureau is
required to consider in completing a section 610 review under the RFA,
as described above.
Where possible, please submit detailed comments, data, and other
information to support any submitted positions.
II. CARD Act Section 502(a) Review
As discussed in part I.A.2, section 502(a) of the CARD Act \88\
requires the Bureau to conduct a review, within the limits of its
existing resources available for reporting purposes, of the consumer
credit card market every two years. As discussed in part I.A.4, to
inform that review, CARD Act section 502(b) instructs the Bureau to
seek public comment.\89\
---------------------------------------------------------------------------
\88\ See 15 U.S.C. 1616(a).
\89\ See 15 U.S.C. 1616(b).
---------------------------------------------------------------------------
As discussed in part I.A.2, the Bureau has issued four Reports in
relation to these reviews. The Bureau's first Report describing this
review was published in October 2013; the Bureau's second such Report
was published in December 2015; the Bureau's third such Report was
published in December 2017; and the Bureau's fourth such Report was
published in August 2019. To inform the Bureau's next review, the
Bureau invites members of the public, including consumers, credit card
issuers, industry analysts, consumer groups, and other interested
persons to submit information and other comments relevant to the issues
expressly identified in part II.B below, as well as any information
they believe is relevant to a review of the credit card market.
A. Background: The CARD Act
The CARD Act was signed into law in May 2009.\90\ Passage of the
CARD Act was expressly intended to ``establish fair and transparent
practices related to the extension of credit'' in the credit card
market.\91\ As discussed in part I.A.1, to achieve these agreed-upon
purposes, the CARD Act changed the requirements applicable to credit
card practices in a number of significant respects.\92\
---------------------------------------------------------------------------
\90\ The CARD Act's provisions took effect in three stages:
August 2009, February 2010, and October 2011.
\91\ Public Law 111-24, 123 Stat. 1734 (2009).
\92\ See also 2013 Report at 10-13.
---------------------------------------------------------------------------
B. Request for Comment
In connection with its pending review, the Bureau seeks information
from members of the public about how the credit card market is
functioning. The Bureau seeks comments on the experiences of consumers
and providers in the credit card market and on the overall health of
the credit card market, as outlined in CARD Act section 502(a) and in
(1) through (7) below. As noted above, while the Bureau identifies
specific topics of interest below, the Bureau wants to be alerted to
and understand the information that consumers, credit card issuers,
industry analysts, consumer groups, and other interested persons
believe is most relevant to the Bureau's review of the credit card
market, so this list of subjects should not be viewed as exhaustive.
Commenters are encouraged to address any other aspects of the consumer
credit card market that they consider would be of interest or concern
to the Bureau.
Please feel free to comment generally and/or respond to any or all
of the questions below but please indicate in your comments on which
topic areas or questions you are commenting:
(1) The terms of credit card agreements and the practices of credit
card issuers.
a. How have the substantive terms and conditions of credit card
agreements or the length and complexity of such agreements changed over
the past two years?
b. How have issuers changed their pricing, marketing, underwriting,
or other practices?
c. How are the terms of, and practices related to, major
supplementary credit card features (such as credit card rewards,
deferred interest promotions, balance transfers, and cash advances)
evolving?
d. How have issuers changed their practices related to deferment,
[[Page 53306]]
forbearance, or other forms of debt relief or assistance offered to
consumers?
e. How have creditors as well as third-party collectors changed
their practices over the past two years of collecting on delinquent and
charged-off credit card debt?
f. Has the use of electronic communication (e.g., email or SMS) by
creditors and debt collectors in connection with credit card debt grown
or otherwise evolved?
g. How are the practices of for-profit debt settlement companies
changing and what trends are occurring in the debt settlement industry?
How are creditors and non-profit credit counseling agencies responding
to these changes and trends?
(2) The effectiveness of disclosure of terms, fees, and other
expenses of credit card plans.
a. How effective are current disclosures of rates, fees, and other
cost terms of credit card accounts in conveying to consumers the costs
of credit card plans?
b. What further improvements in disclosure, if any, would benefit
consumers and what costs would card issuers or others incur in
providing such disclosures?
c. How well are current credit card disclosure rules and practices
adapted to the digital environment? What adaptations to credit card
disclosure regimes in the digital environment would better serve
consumers or reduce industry compliance burden?
(3) The adequacy of protections against unfair or deceptive acts or
practices relating to credit card plans.
a. What unfair, deceptive, or abusive acts and practices exist in
the credit card market? How prevalent are these acts and practices and
what effect do they have? How might any such conduct be prevented and
at what cost?
(4) The cost and availability of consumer credit cards.
a. How have the cost and availability of consumer credit cards
(including with respect to non-prime borrowers) changed since the
Bureau reported on the credit card market in 2019? What is responsible
for changes (or absence of changes) in cost and availability? Has the
impact of the CARD Act on cost and availability changed over the past
two years?
b. How, if at all, are the characteristics of consumers with lower
credit scores changing? How are groups of consumers in different score
tiers faring in the market? How do other factors relating to consumer
demographics or financial lives affect consumers' ability to
successfully obtain and use card credit?
(5) The safety and soundness of credit card issuers.
a. How is the credit cycle evolving? What, if any, safety and
soundness risks are present or growing in this market, and which
entities are disproportionately affected by these risks? How, if at
all, do these safety and soundness risks to entities relate to long-
term indebtedness on the part of some consumers, or changes in
consumers' ability to manage and pay their debts? Has the impact of the
CARD Act on safety and soundness changed over the past two years?
(6) The use of risk-based pricing for consumer credit cards.
a. How has the use of risk-based pricing for consumer credit cards
changed since the Bureau reported on the credit card market in 2019?
What has driven those changes or lack of changes? Has the impact of the
CARD Act on risk-based pricing changed over the past two years?
b. How have CARD Act provisions relating to risk-based pricing
impacted (positively or negatively) the evolution of practices in this
market?
(7) Consumer credit card product innovation.
a. How has credit card product innovation changed since the Bureau
reported on the credit card market in 2019? What has driven those
changes or lack of changes? Has the impact of the CARD Act on product
innovation changed over the past two years?
b. How have broader innovations in finance, such as (but not
limited to) new products and entrants, evolving digital tools, greater
availability of and new applications for consumer data, and new
technological tools (like machine learning), impacted the consumer
credit card market, either directly or indirectly? In what ways do CARD
Act provisions or its implementing regulations encourage or discourage
innovation? In what ways do innovations increase or decrease the impact
of certain CARD Act provisions, or change the nature of those impacts?
Signing Authority
The Director of the Bureau, having reviewed and approved this
document, is delegating the authority to electronically sign this
document to Laura Galban, a Bureau Federal Register Liaison, for
purposes of publication in the Federal Register.
Dated: August 26, 2020.
Laura Galban,
Federal Register Liaison, Bureau of Consumer Financial Protection.
[FR Doc. 2020-19112 Filed 8-27-20; 8:45 am]
BILLING CODE 4810-AM-P
