PenFed To Be First To Use CFPB Simplified Disclosure Format

Pentagon Federal Credit Union are to be the first to try out the new simplified credit card disclosure form which has been put together by the Consumer Finance Protection Bureau.

The acting director of the Consumer Finance Protection Bureau, Raj Date, announced that Pentagon Federal Credit Union, who are among the largest credit unions in the whole of the United States, have agreed to use the highly simplified format of the terms and conditions document with all new credit card applicants from the start of the current year.

A sample of the credit card disclosure form was posted online by the Consumer Finance Protection Bureau early last month. The document is not mandatory, but banks and other financial institutions are facing mounting pressure to streamline their credit card and checking account agreements in order to make them more transparent and easier to understand.

Reports published last month showed that the majority of complaints received by the Consumer Finance Protection Bureau in regard to credit cards was rooted in consumers failing to understand their credit card agreements.

Some agreements run to several pages where as the sample provided by the Consumer Finance Protection Bureau has been shortened to 2 pages and features tables and bullet points designed to present information more clearly.

In 2000, credit cards were pushed to change their marketing practices when congressman Charles Schumer sponsored a piece of legislation that required lenders to use a consistent design to display account rates and fees.

This so called ‘Schumer Box’ remains a required element of credit card applications and appears on the Consumer Finance Protection Bureau’s sample form which banks can opt to use to streamline their own agreements.

Credit card users are not the only consumers who will be seeing much more transparency from banks in the new year. Chase Bank has recently announced that they will be dropping some unpopular checking account fees. In order to highlight this transition to a more simplified fee structure, Chase will also be adopting a new streamlined disclosure form for checking account applications.

The disclosure form they will use was designed by non-profit researchers from Pew Health Group. The document has reduced typical forms to a single sheet which explains all fees, rates and penalties in clear language.

These simplified disclosure forms are not mandatory, however, consumer advocates believe that competitive pressure will push more banks and credit card issuers to adopt them especially since research shows that banks earn more business when they make things easier for customers.

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