WASHINGTON (AP) — Confused by the fees and terms of your credit card? The Federal Reserve wants to make your monthly bill and solicitations that arrive in your mailbox easier to understand. The Fed also wants companies to give people more than a month — 45 days — notice before making any changes to the terms of an account, including slapping on a higher penalty rate for missing payments or paying bills late.
Under current regulations, credit card companies in most cases provide 15 days notice before making certain changes to the terms of an account, the Fed said. However, under current regulations creditors need not inform a consumer in advance if the interest rate to an account increases due to default or deliquency. The extra time gives people time to pursue their options, including switching to another credit card provider.
“The goal of the proposed revisions is to make sure that consumers get key information about credit card terms in a clear and conspicuous format and at a time when it would be most useful to them,” Fed Chairman Ben Bernanke explained Tuesday. “Greater clarity in credit disclosures allows consumers to make more informed credit decisions and enhances competition among credit card issuers.”
People now often have to wade through tiny print and dense language to get information about the terms of their credit card. When terms — including rates and fees — are changed, that can be on a separate piece of paper accompanying the monthly statement. Those separate inserts aren’t always looked at, the Fed said. To help, the Fed’s proposal would call for a table summarizing the changes to appear on the statement above the list of the consumers’ transactions. That’s where people are most likely to notice the changes, the Fed said.
From solicitations to monthly statements, the Fed’s proposal would require key information appear in larger print, with rates and fees in an easier-to-see boldface. The proposal also aims to make language easier for people to understand. “The purpose is to avoid those ‘gotcha’ moments,” said Fed Governor Kevin Warsh.
Among the changes being considered:
— Itemizing interest charges for different types of transactions, such as purchases and cash advances, on the monthly statement and providing separate totals of fees and interest for the month and year to date. The effect of making only mimimum payments would also be disclosed.
— For solicitations and applications, the Fed is proposing that information about events that trigger penalty rates and important fees — such as late payment fees, balance transfer fees and cash advance fees — be placed in a summary table. Currently, this information may be placed outside the summary table, the Fed said.
—With respect to account-opening disclosures, the proposal would require credit card companies to include a table summarizing the key terms of the account. “Setting apart the most important terms in this way will better ensure that consumers are apprised of those terms,” the Fed said.