Bank of America is the first major credit card issuer to announce a solution that falls under the “Plain Language in Plain Sight” provision of reform laws that take effect in February.
BofA, the nation’s largest bank by assets, calls it “Credit Card Clarity Commitment,” a one-page summary of customers’ rates, fees and payment information.
The bank said today it is meant to “simplify consumer communications and help customers understand their banking agreements.” The new summaries will be sent to about 40 million current cardholders beginning in December, and will be available to new customers next year.
“We know that now, more than ever, people want clear, straightforward information from their bank,” said Bank of America Global Card Services President Ric Struthers. “Our goal is to communicate clearly and make it as simple and easy to understand as possible so that they can use credit wisely.
The clarity commitment is the first consumer-friendly move in a string of unpopular ones that Bank of America has had to make in the wake of record credit card charge-offs this year. It has reduced available credit for many customers, and added annual fees.
The bank wrote off $14.3 billion as uncollectible card loans through Sept. 30, about three-quarters more than the same period last year. It’s 13.2 percent write-off rate for October is the highest of all major card issuers.
The Credit CARD Act of 2009 will be fully enforced beginning Feb. 22. Its many provisions cover how and when card issuers can raise rates and impose penalty fees. But the “Plain Language” provision is almost as extensive, requiring very specific disclosures that help customers make informed choices “about using the right financial products and managing their own financial needs.”
Here’s a sampler of the reform legislation’s “Plain Language” section:
- Creditors will give consumers clear disclosures of account terms before consumers open an account, and clear statements of the activity on consumers’ accounts afterwards.
- Model disclosures will be updated regularly based on reviews of the market, empirical research, and testing with consumers to ensure that disclosures remain clear, useful, and relevant.
- Issuers will be required to show the consequences to consumers of their credit decisions by displaying on periodic statements the length of time it would take to pay off the existing balance – and the total interest cost – if the consumer paid only the minimum due.
- Issuers will also have to display the payment amount and total interest cost to pay off the existing balance in 36 months.
- Issuers will be required to make contracts available on the Internet in a usable format.
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