Federal Reserve Board Vice Chairman Donald Kohn, testifying on Thursday before the Senate's Securities, Insurance and Investment Subcommittee, said credit card disclosures under the Truth in Lending Act may not provide sufficient consumer protection.
In a hearing titled "Risk Management and its Implications for Systemic Risk," Kohn said new rules might be needed to require financial institutions to "make changes to their business models and alter some practices." His comments were based on the results of public comments and "extensive consumer testing," – which involved a marketing agency trying out various forms of communicating credit card disclosures to consumers to see what works best.
The Federal Reserve is gathering comments through July 18 about possible changes to Regulation Z, which implements the Truth in Lending Act., to simplify and clarify the way issuers disclose the details of credit card agreements in card applications and solicitations.
The proposal is part of a larger effort by the Federal Reserve, Office of Thrift Supervision and National Credit Union Administration to study various credit card industry rules changes on Unfair or Deceptive Acts or Practices under the Federal Trade Commission Act. As of today, the Federal Reserve has received an estimated 5,000. The comment period ends Aug. 4, and the agencies expect the rules to go into effect before the end of this year.