WASHINGTON The Consumer Financial Protection Bureau announced March 17 that it's seeking public comment ahead of a second study on the credit card market that could pave the way for new regulations or enforcement actions.
The CFPB is required to perform a study of the market every two years to gauge how rules have affected credit card terms and disclosures, among other things.
But for this go around, the agency added two additional topics it wants to examine: debt collection practices, specifically for debt being charged off or sold, and how issuers are applying ability-to-repay standards to applicants. Though the study is required by Congress, it's also a tool in helping the CFPB determine whether the market needs further rulemaking.
"With today's inquiry, the bureau is seeking to further understand how the credit card market is working in practice and how credit card protections affect consumers and credit card issuers," said CFPB Director Richard Cordray, in a press release. "As we undertake this review, the bureau wants to ensure it understands the information that consumers, industry, advocates, and other stakeholders believe is most relevant."
Industry observers said the study is a precursor to what the CFPB may crack down on next year in the card market.
"The CFPB in late 2015 will issue its second report on the CARD Act," wrote Jaret Seiberg, an analyst with Guggenheim Securities, in a note to clients. "That report is likely to set the blueprint for regulations and enforcement in 2016. This is why we see the report as a threat to card issuers."
The study is required to be performed every two years under the Credit Card Accountability, Responsibility and Disclosure Act of 2009, mainly to watch how the law impacted the market and consumers. The CFPB's first study released October 2013 largely focused on concerns about add-on products, higher annual fees and deferred interest rate specials.
This time, the CFPB appears to be focusing on debt collection practices and ability-to-repay standards. On debt collection, the CFPB wants to know about debt sales, third-party management, how collectors are minimizing losses from delinquent borrowers before the debt is charged off and how they secure recoveries after it's charged off.
The questions on ability-to-repay largely relate to how card issuers determine whether to issue or increase a credit line and how those practices affect consumer access to credit as well as the outcome for consumers on certain card products.
The upcoming study still contains questions on the CARD Act such as the complexity of card agreements, the costs of disclosures, and how the law has affected credit availability and innovation in the last two years.
"The bureau is looking to see how card issuers may have changed their pricing, marketing, underwriting, or other practices and whether those changes have benefited or harmed consumers," the CFPB said.
The CFPB also kept the six topics that it added to its previous study, seeking comment on areas such as online disclosures, add-on products, deferred interest products and fees charged upfront called "fee-harvester cards."
The comment period closes 60 days after the request for information is published in the Federal Register.
"The CFPB review will culminate in a public report to Congress on the state of the consumer credit card market," the agency said. "The bureau will use the data gathered to help inform future policy decisions on the topic."