The credit card market continues to be high on the Consumer
Financial Protection Bureau's hit list. As noted in prior
blog posts, the CFPB is focused intently on advertising and
marketing of financial products and services. Because large
advertising dollars are spent on credit card marketing, card
issuers need to proceed with caution.
So far, the CFPB has brought three enforcement actions related to
credit card add-on products; with the potential for more credit
card market actions in the future.
In mid-September, the CFPB chased down allegations that a major
bank engaged in unfair billing practices for certain credit
monitoring products, which were offered to consumers as
'add-ons' to credit card accounts. Like its first two
actions involving similar facts (announced in July and September
2012), the CFPB entered into a consent order with the bank
imposing, in addition to a civil monetary penalty, significant
conduct requirements around its credit card marketing, including
the sale of add-on products by phone.
About a week later after announcing the settlement, the CFPB
released a report detailing how the Credit Card
Accountability Responsibility and Disclosure Act of 2009 (CARD Act)
reduced penalty fees and made the cost of credit cards clearer to
consumers. But, the report also highlighted the CFPB's
continued areas of concern:
- Add-on products: According to the report, the CFPB "remains concerned about the ways these products are marketed and will continue to pursue deceptive practices in the market."
- Fee harvester cards: High application and user fees were addressed in the CARD Act, and the CFPB said it will "continue to monitor the use of application fees in connection with account openings to determine if it should take action under its available authorities."
- Deferred interest products: The CFPB intends to study the risks and benefits of cards that allow users to finance purchase without interest for a period of time.
Finally, and perhaps most significantly, the report reveals the
CFPB has "outstanding concerns" about disclosures in
three different areas: (1) online disclosures; (2)
disclosures concerning rewards products; and (3) disclosures
concerning grace periods. Although the CFPB did not
articulate how, it made clear that it intends to review
whether such disclosures are being made in a clear and transparent
manner. However, based on the frequency and number of recent
enforcement actions, the CFPB has shown its readiness to flex its
enforcement muscle.
Although the general principles of advertising law apply across all
mediums and topics, we all know that issues can arise when
disclosures are used to help provide important information to
consumers and comply with technical requirements that apply to
credit card offers (e.g., TILA). Credit card marketers will
want to be sure they review all existing disclosures and consider
the CFPB's track record of credit card market place enforcement
as new advertising is developed.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.