Making Credit Card Disclosures Easier to Understand

One of the many challenges facing credit union marketing specialists these days is taking complex financial concepts and making them easy to understand – without losing any of the vital specifics. Nowhere is this more fundamental than when it comes to disclosures.

According to the U.S. Consumer Financial Protection Bureau (CFPB), only 32 percent of consumers understand their credit-card agreements. With roughly 80 percent of Americans using credit cards, that’s a lot of people potentially left in the dark with their financial and legal obligations to your credit union. Even more telling, the bureau collected more than 5,000 consumer credit card complaints in only a six-month period.

The federal CARD Act from 2010 was a definite step in the right direction in helping make credit card disclosures easier for consumers to understand. While the changes helped spell out how long it would take to pay off a credit card by paying the minimum payment – this has had no real effect on consumer behavior. 70 percent of consumers surveyed said they’ve noticed these disclosure changes but less than one-third say it has caused them to make larger payments or to stop charging.

The CFPB feels more disclosure changes are needed. “The bottom line is that many credit card agreements are confusing and most consumers don’t understand them,” stated CFPB special adviser Raj Date.

So, what is a credit union to do? The CFPB has a few ideas, which is why they’ve developed a shorter, simpler credit card agreement. You can view their prototype here. The motivation behind this revamping is something credit unions can wrap their arms around – putting consumers/members first by helping them understand their disclosures.

This prototype is not mandatory, and credit unions still need to juggle simplified language and compliance issues with each disclosure. But the CFPB is hoping this will get financial institutions like yours thinking about what you’re saying to your members and the best way to say it. And if you need help updating your credit card disclosures, CU Solutions Group is happy to help.

Related Services: Operational Forms, Website Compliance, HR Compliance