The federal Consumer Financial Protection Bureau is now proposing new requirements for credit card agreements that make it easier for consumers to understand. The logic is that many consumers end up agreeing to credit card terms because they don’t understand all the financial lingo. Even those who read the agreements and believe that they understand what it says may at times have difficulty deciphering the code.
Now with this new proposal of a simplified, laymen’s terms credit card agreement consumers should be able to understand fully what they are agreeing to before they agree to it. According to experts even many people who typically understand financial lingo can get confused in some of the long and drawn out agreement terms. This is unfair to consumers and could lead many responsible people into bad credit that could have been avoided.
In a statement given during the announcement on this new proposal, Raj Date, a temporary leader for the agency said “The bottom line is that many credit card agreements are confusing and most consumers don’t understand them.”
Those working on the proposal developed a prototype of what a credit card agreement should look like and it is much shorter than the average. Most credit card agreements these days are around five thousand words, but this prototype is only about a thousand. The prototype also gets rid of all unnecessary legal mumbo jumbo. “Consumers won’t drown in page after page of difficult-to-understand terms,” Mr. Date said.
The new document that is proposed should now be much easier for consumers to understand. It will explain to consumers exactly how the credit card functions as well as what fees will be charged and when these fees will be charged and it will also explain to consumers what they can do if there is an error on the account.
But this won’t be the final document used. The administration will be making the document available to the public and will wait for feedback from both consumers as well as credit card companies to ensure that the document is understandable by everyone but still contains all the pertinent information to owning a credit card. In addition to that the administration is also in the process of compiling a database of current credit card agreements which will be organized by company. The database will be made available as a matter of public record.
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