Consumers regularly receive offers to open a new credit card in the mail. While the majority of these credit card offers go directly into the paper shredder, there are a few that catch the eye of the consumer -- promising certain desirable terms in bold print -- and which he or she decides to secure. However, many consumers who apply for these credit cards ultimately neglect to read the few pages worth of fine print accompanying the application outlining its terms/costs. This is significant because these boilerplate terms may ultimately mean the difference between the development of good credit or bad credit.

In other words, a consumer who secures a credit card without reading the terms of the agreement may not fully understand what happens if they are late on a payment or how interest is calculated on their purchases. In fact, those consumers brave enough to attempt to read the fine print to learn more about their credit card may soon find themselves lost if they are lacking a legal and/or financial background.

In order to rectify this situation, the Consumer Financial Protection Bureau (CFPB) is now testing a prototype credit card agreement that outlines costs, changes and other important information in a short and altogether simpler manner.

Specifically, the agency will be providing the majority of credit card applicants at the Pentagon Federal Credit Union with a credit card agreement that is just over 1,000 words (versus the typical agreement which routinely runs over 5,000 words), and which omits so-called "legalese" in favor of basic information broken down into three distinct sections (costs, changes, additional information).

In order to have some basis of comparison, the CFPB will also distribute the standard credit card agreement to some of the new credit card applicants at the Pentagon Federal Credit Union.

In addition, the agency is posting a sample of the simpler credit card agreement on its website and actively seeking consumer feedback.

While the results of the 6-month test at the Pentagon Federal Credit Union and the feedback provided by consumers on the CFPB website regarding the sample credit card agreement will certainly be informative, the agency has indicated that it currently has no plans in place to make the new agreements mandatory.

It is worth noting that the banking industry is generally supportive of the CFPB's efforts, but also takes issue with the fact that the sample agreement only provides consumers with a glossary of contract terms rather than setting them out in the contract itself, something they say subjects credit card companies to potential liability.

"Making [the terms] available is not the same as getting it," said Nessa Feddis, vice president of the American Bankers Association.

Stay tuned for more from our San Antonio bankruptcy blog ...

Contact an experienced legal professional to learn more about managing credit card debt/bad credit and fighting creditor harassment.

This post is for informational purposes only and is not to be construed as legal or financial advice.

Source:

Bloomberg BusinessWeek, "A simpler credit card agreement is getting a tryout" Dec. 7, 2011