May 16, 2021

Bucks Blog: A Proposal to Simplify Credit Card Agreements

Bloomberg News for The New York Times

Credit card agreements are typically something you’d want to read only if you suffered from insomnia. A glance at a few lines of the dense type, printed on filmy paper, is sure to help you drift off.

But buried in all that fine print are important provisions that affect you financially. So the federal Consumer Financial Protection Bureau is proposing a new, simplified form, to help make the agreements more readable and useful to card holders.

“The bottom line is that many credit card agreements are confusing and most consumers don’t understand them,” said Raj Date, the agency’s temporary leader, in prepared remarks announcing the effort on Wednesday.

The prototype is short — about 1,000 words, compared with roughly 5,000 for the average industry agreement — and it does away with much of the legalese that is too dense for most consumers to digest. “Consumers won’t drown in page after page of difficult-to-understand terms,” Mr. Date said.

Instead, that language has been edited out and moved into a list of standard definitions that can be made available separately — online, for instance.

The resulting plain-language document, Mr. Date said, should do a better job of explaining how the credit card actually works, including what fees apply and when, and what to do if there is an error on the account.

The suggested form is meant as a “thought starter” and will be modified in response to feedback from card companies and the public.

At the same time, the agency is making available a database of existing credit card agreements from more than 300 card issuers, searchable by the name of the issuer as well as by specific terms. (If you have any doubt that the forms could use some simplifying, take a look at any one of the agreements.)

What do you think of the suggested form? What changes would you propose?

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