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Wednesday
Dec142011

CFPB Asks Consumers for Input on New Credit Card Contracts

George Doyle/Thinkstock(WASHINGTON) -- When the Consumer Financial Protection Bureau (CFPB) recently collected consumer complaints about credit cards, one of the overarching themes was confusion over the terms of the cards.  Whether consumers were complaining that their interest rate suddenly went up or that they were charged a penalty fee, it often came down to one thing: they didn't understand the contract.

Now, the CFPB has developed a prototype contract it thinks will simplify the whole mess.

The average credit card contract is about 5,000 words long, while the new CFPB one is a little over a thousand. It doesn't do away with the fine print, necessarily, but instead takes all of the terms of art in the contracts and relegates them to a separate "definitions" page, so the lawyers will still be satisfied.  By shunting that boilerplate elsewhere, the agreement itself can be written in plain language instead of legalese.

Inevitably, though, the new format will not be perfect or perfectly understandable. And that's where consumers come in: the CFPB is asking members of the public to weigh in on the form on its website.

While consumers voice their opinions, the new contract will also be test-piloted by Pentagon Federal Credit Union, an active credit union with credit card customers nationwide. Once smoothed out, however, the model contract is not slated to be mandatory -- credit card companies will have to opt in.

Ira Rheingold of the National Association of Consumer Advocates believes they may balk at first, but he thinks most will eventually get on board, because a credit card agreement that simply states the basics like interest rate, cash advance interest rate, and annual fee will allow consumers to shop and compare and choose the best deals.

Copyright 2011 ABC News Radio

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