Know Before You Owe: Consumer Financial Protection Bureau's New Initiative

This week marks another shift toward greater consumer protection in the credit card industry as the Consumer Financial Protection Bureau (CFPB) launches a new component of the Know Before You Owe project, which aims to simplify credit card agreements and make them easier for consumers to understand.

Building on the Credit Card Accountability, Responsibility, and Disclosure Act (CARD Act) that was passed two years ago, the new Know Before You Owe endeavor attempts to take consumer protection a step further by developing a more straightforward credit card agreement prototype.

“Despite the changes resulting from the CARD Act, credit card agreements still remain long, complicated, and overwhelming to consumers,” said Charles Tran, Founder of CreditDonkey.com, a credit card comparison site. “The new prototype seeks to lessen the burden on consumers by creating a shorter, clearer, more consumer-friendly, and consistent prototype for card agreements. Ultimately the 2-page prototype would pave the way for improved consumer understanding around the terms and risks of their credit cards. This is a critical step in the right direction to protect consumer interests and make sure they are more equipped to make more informed credit decisions.”

CFPB has posted the prototype on their web site so the public can provide feedback on the prototype. As part of this effort, CFPB also plans to test pilot the prototype with Pentagon Federal Credit Union to obtain consumer’s input.

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