[co-author: PJ Hoffman - Project Manager, Financial Services Practice Group]

The Consumer Financial Protection Bureau (CFPB or Bureau) announced on March 17 that it is seeking public comment, via a Request for Information, ahead of a second study on the credit card market.

With this request, the Bureau is seeking to gather more information about how the credit card market is functioning, as well as the impact on consumers of the 2009 Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. The specific areas that the Bureau is requesting information on include the following:

• the terms of credit card agreements and practices of credit card issuers
• unfair or deceptive acts or practices in the credit card market
• consumer understanding of rewards products
• the effectiveness of disclosure of terms, fees and other expenses of credit card plans
• whether implementation of the CARD Act has affected the cost and availability of credit, particularly with respect to non-prime borrowers; the use of risk-based pricing; and credit card product innovation
• online disclosures
• grace periods
• add-on products
• fee harvester cards
• deferred interest products
• debt collection practices
• ability-to-repay standards, as they relate to credit applicants.

Any public comments may be submitted to the Bureau by May 18, 2015. The CFPB will present a public report to Congress after compiling the feedback received during the comment period, which we expect to be sometime during summer 2015.

We have already seen an advanced notice of proposed rulemaking on debt collection activities in 2014 and expect to see a proposed rule soon. The study will likely provide a roadmap of the issues that will be included in any rule on debt collection activities when it is proposed.

In addition, in 2013, we saw the CFPB amend Regulation Z to make it easier for spouses or partners who do not work outside the home to qualify for credit cards. The request asks about ability-to-repay standards for credit cards and includes questions about how card issuers are determining whether credit card applicants have sufficient income or assets to qualify for new credit or a credit line increase. This could lead to additional rulemaking that would revise Regulation Z’s ability-to-repay standards as they relate to credit line increases.

Pepper Points

• Based on our experience with the CFPB when they study an issue with lawyers, supervisors, consumer credit experts, economists, outside consultants or other disclosure experts within the agency, we expect the CFPB to follow its study by issuing new regulations or increasing enforcement actions in those areas of interest.
• Congress requires the CFPB to perform a study on the credit card market every two years, but the addition of two new topics to this study signals strong interest by the Bureau in examining debt collection and ability-to-repay standards for credit cards.