Chicago, IL: Field Hearing on Credit Cards

Welcome. Welcome to the Consumer Financial
Protection Bureau’s field hearing in Chicago, Illinois, at the beautiful Harold Washington
Public Library. We are here to discuss the effects of the CARD Act. The Consumer Financial
Protection Bureau, or the CFPB, is an independent federal agency whose mission is to help consumer
finance markets work by making rules more effective, by consistently and fairly enforcing
those rules, and by empowering consumers to take more control over their economic lives.
My name is Zixta Martinez. I am the Associate Director for External Affairs at the CFPB. Today’s field hearing is being live-streamed
on our website at, and you can follow CFPB on Twitter and Facebook.
You can also file a consumer complaint at, by U.S. mail, by fax,
or by calling 1-855-411-2372. That’s 1-855-411-2372. I am going to spend just a few minutes telling
you about what you can expect at today’s field hearing. First, you will hear remarks from
Director Cordray, who will talk about the Bureau’s CARD Act report. Following the Director’s
remarks, CFPB Assistant Director Marla Blow will lead a discussion with a panel of experts,
who will also talk about the impact of this CARD Act on this market. Assistant Director
Marla Blow will be joined by the CFPB’s Deputy Director, Steve Antonakes. Following the panel discussion is my favorite
part, the audience participation portion of the field hearing. This audience participation
portion is an opportunity for us to hear from you about what’s going on in your community
in the consumer finance markets, and our audience today includes community leaders, advocates,
industry representatives, and of course, consumers. Our audience also includes the members of
the CFPB’s Credit Union Advisory Council, which is holding its quarterly meeting here
in Chicago. We also are pleased to welcome bipartisan congressional staff from the offices
of Senator Mark Kirk, Congresswoman Jan Schakowsky, Congressman Luis Gutierrez, and Congressman
Mike Quigley. Thank you all for joining us here today. So let’s get started. I am now very pleased
to introduce Richard Cordray. Prior to his current role as the CFPB’s first Director,
Richard Cordray led the CFPB’s Enforcement Office. Before that, he served on the front
line of consumer protection as Ohio’s Attorney General. In this role, he recovered more than
$2 billion for Ohio’s retirees, investors, and business owners, and took major steps
to help protect consumers from fraudulent foreclosures and financial predators. Before
serving as Attorney General, he also served as Ohio State Representative, Ohio Treasurer,
and Franklin County Treasurer. Director Cordray. [Applause.] RICHARD CORDRAY: Thank you, Zixta. Thank you so much for all of you being here
today, and I want to thank you especially because, as I was sitting here, I noticed
we had been here already for a time this morning, that all of you somehow brought the sunshine
with you today, so thank you. I am always happy to be back in Chicago, where
I spent 3 good years as a law student, and noting that this is the Harold Washington
Public Library, I had a nice story about Harold Washington and the parrots of the South Side
of Chicago. But I will not belabor you with it here. We are hosting this field hearing to discuss
the effects of the Credit Card Accountability Responsibility and Disclosure Act, a law commonly
known as the CARD Act. The CARD Act was passed with the specific goal of making the credit
card market fairer and more transparent for consumers. Today, we are releasing a report
that Congress required us to prepare about the impact of the CARD Act on the marketplace. Before we discuss the results of our report,
however, it is important to describe conditions in the marketplace when the CARD Act was signed
into law. The economic landscape in May 2009 was quite poor. The housing market had crashed.
Unemployment had risen to 9.4 percent. A whopping 14.5 million people were out of work, and
that number was expected to continue to grow. Gross domestic product had moved sharply into
negative territory, falling by 8.3 percent and 5.4 percent in the previous two quarters,
and the Federal Reserve was predicting it would drop even further. At that time, I was serving as Ohio’s Attorney
General, and we saw firsthand how hard people were struggling to stay afloat. Particularly
with respect to credit cards, people were extremely frustrated, and they were complaining
loudly and frequently about being dinged by unexpected fees and about dealing with card
agreements full of fine print and legalese they could not decipher or understand. The
bottom line at the time was that consumers had no good way to assess the true cost of
their credit card up front. Some Members of Congress became interested in how to address
the challenges raised by their constituents, and the Federal Reserve had swung into action
to develop some new rules in this area. Against that backdrop, Congress passed the CARD Act
to address troublesome practices and reform the credit card markets. One problem that consumers faced was hidden,
excessive, and unfair fees. These fees made it hard for consumers to anticipate cost.
In some cases, they could not avoid these fees and did not know they were coming. Maybe
a consumer’s check payment was due on a holiday and there was no mail delivery, so the check
was not received in time, or maybe the consumer unwittingly spent more than the credit line.
Some consumers set up mechanisms to pay their bills regularly but were ambushed when payment
due dates changed from month to month. In these cases, the consumer would be charged
an unexpected fee. The CARD Act took action to address each of
these problems. The law set standards for when late fees can be assessed. Congress established
that credit card bills must be due on the same date each month and that card issuers
generally cannot charge a late fee unless consumers are given at least 21 days to pay
their bill. The law also established limits on how much can be charged in late fees. As a result, we found that the average size
of late fees declined since the passage of the CARD Act. Based on the credit card accounts
we studied, representing most of the market, we estimate that the average late fee decreased
by $6 after the CARD Act took effect. That means these consumers paid $1.5 billion less
in late fees in 2012 than they would have paid had late fees remained at their pre-CARD
Act levels. The CARD Act also tackled over-limit fees,
which often surprised those consumers who had no idea they had spent past their credit
limit. Prior to the law, card issuers could charge a fee for transactions that put cardholders
over their credit limit, and each over-limit transaction could result in an additional
fee. The CARD Act barred companies from charging a fee to cardholders who exceed their credit
limit unless the cardholder has affirmatively opted in to pay over-limit fees. Additionally, card issuers can no longer charge
more than one over-limit fee during a billing cycle. With these changes, over-limit fees
have been largely eliminated as a source of cost to consumers and revenue to issuers.
Based on the credit card accounts that we studied, we estimate that if everything else
had remained equal except for the changes made by the CARD Act, those consumers would
have paid about $2.5 billion more in over-limit fees in 2012 than they actually paid. We did find that annual fees and interest
rates have increased since 2008, which indicates a shift from hidden back-end pricing toward
more transparent front-end pricing that consumers can understand and evaluate more easily. Even
more significantly, however, we found that the total cost of credit, which includes all
fees and finance charges, declined between 2008 and 2012 by 2 percentage points. Consumers were also struggling with a lack
of transparency when it came to their credit cards. Credit card agreements were long and
difficult to understand. These agreements often contained provisions which allowed the
credit card issuer to hike the rate if the consumer tripped any of several complicated
wires, including the notorious universal default. Cardholders would open their monthly statements
and be surprised to find that their interest rate had jumped. Credit card agreements also
allowed issuers to change the terms at any time and for any reason, and the new terms
could be applied to existing balances. Such price changes made it difficult for consumers
to predict the cost of their credit card and manage their finances accordingly. The CARD
Act sought to make credit card costs clearer to consumers, and we found that it dramatically
improved overall transparency in the market. In order to address unexpected interest rate
hikes, the CARD Act generally stopped card issuers from increasing the interest rate
on an existing balance unless the cardholder has missed two consecutive payments. The law
also added new requirements for monthly statements. Now the statements must include useful information,
like how long it will take to pay off the bill if the consumer pays only the minimum
amount due and how much doing so will cost the consumer. These disclosures give consumers
a clearer sense of the consequences in deciding how to handle their credit card payments. The CARD Act’s new disclosure requirements
and the end of surprise interest rate increases resulted in a market where pricing is more
predictable and transparent for consumers. In this market, shopping for a credit card
and comparing costs are far more straightforward, and every credit card user can now make a
purchase confident that when the bill comes due, the interest rate will not have skyrocketed
without notice. They can count on the fact that if they make their payments on time,
the terms of the deal they made at the time of purchase are the terms of the deal they
will live with over time. We also determined that credit card contracts
have become shorter and easier to understand in recent years. Our report showed that the
card agreements we studied from the largest card issuers have decreased by more than 2,000
words on average and that readability has gone up, making the market more transparent
and accessible for consumers. This is not something the CARD Act required, but it is
something we have been urging in order to help consumers process the key information
more easily, so they can know before they owe. Many card issuers have chosen to embrace the
spirit of the new law in this respect. We applaud those who are making this effort,
we will continue to push others to follow their lead and make further changes, and we
remain willing to work with credit card issuers in finding ways to serve their customers better. Consumers have responded positively to these
market-wide changes. When J.D. Power released its 2013 U.S. Credit Card Satisfaction Study,
it showed credit card satisfaction is at an all-time high since the study was first conducted.
Significantly, the study concluded that overall, customers appear to be increasingly happy
with their credit cards, and J.D. Power explicitly attributed some of that satisfaction to the
CARD Act. We also believe that the increasing satisfaction
customers are expressing about their credit cards reflects the manner in which some issuers
have intensified their focus on customer complaints. More operations are prioritizing and incentivizing
efforts to remediate individual complaints and to analyze and respond to patterns in
the complaints they receive. These are powerful market developments that naturally improve
customer service and customer loyalty. They also pay tangible dividends by reducing legal
risk, reputational risk, and regulatory risk. Needless to say, we are very much supportive
of these trends. In order to get a complete view of changes
in the credit card market, we examined the overall availability of credit. Credit availability
started declining in 2008, before the CARD Act had even passed, but after the financial
crisis had begun, and by most measures began to rebound in 2009. This is not surprising.
Credit is known to be cyclical, and the nation’s economy was experiencing its sharpest downturn
in decades. So as the crisis hit, credit losses ensued, and creditors implemented more restrictive
credit standards. Even with the changes that occurred during these unusual economic conditions,
consumers with credit cards still have plenty of available credit overall; in fact, there
is currently about $2 trillion worth of unused credit in the market. The CARD Act has provisions that were explicitly
designed to better protect young consumers from getting credit cards they cannot afford.
In the years prior to the CARD Act, it was often too easy for students to rack up credit
card debt they could not pay back and damage their credit rating for years to come. When I was serving as the Treasurer of Ohio,
I heard many bitter complaints from parents about the aggressive marketing practices on
college campuses that targeted naïve 18-year-olds just away from home for the first time. With
the CARD Act, consumers under the age of 21 cannot get a credit card unless they can demonstrate
an independent ability to repay the debt or unless they have a cosigner over the age of
21. Our report found that the number of credit card holders under 21 has been cut in half
in recent years. This decrease, which contributes to the decline in available credit, is an
intended consequence of the CARD Act and is good news in promoting responsible access
to credit. We have seen two other factors that may be
contributing to the dip in available credit. First, we have seen a notable drop in the
number of consumers who receive unsolicited credit line limit increases on their accounts,
meaning that more consumers have to ask for their credit limit to be raised rather than
having it happen automatically. Second, the ability-to-repay provisions in
the new law have had at least a modest effect on credit availability. We have seen that
at least a small slice of consumers whose card issuers may deem to be creditworthy have
been declined for credit cards because they cannot prove they have the means to pay back
the potential debt. We addressed one such issue that came to our
attention by issuing a new regulation earlier this year. This rule made it easier for stay-at-home
spouses or partners to get their own card if they have access to resources that allow
them to make payments. Consumers need access to credit. We simply want to ensure that they
have responsible access to credit. Although the CARD Act effectively addressed
many problematic practices in the market, we do highlight a number of outstanding concerns
in our report. One area of concern is credit card add-on products, where we have seen firsthand
how the deceptive marketing of these products can harm consumers. The Bureau has already
issued a bulletin to put issuers on notice of these problems, and we have brought several
enforcement actions that have put more than $700 million back in the pockets of consumers.
We will continue to use both our supervisory and enforcement authorities to protect consumers
by rooting out unfair, deceptive, or abusive acts or practices. Second, we recognize that some card issuers
charge up-front fees that exceed 25 percent of the initial credit limit, which is the
cap on fees that the CARD Act sought to impose, but those practices have been held not to
be covered by the law because a portion of the fees are paid prior to account opening.
We plan to keep a close eye on how card issuers use application fees in connection with opening
accounts, and we will determine if we should take action under our available authorities. Third, we plan to study the impact of deferred
interest products. These are credit cards that come with a zero percent interest rate
but with a catch. If the balance is not paid in full by a certain time, the company will
assess interest retroactively. The data we have obtained indicates that over 40 percent
of borrowers with subprime credit histories end up being charged retroactive interest.
We will be examining the risks and benefits of such products, and we will take action
if it appears to be justified. Fourth, we have identified a number of areas
in which transparency concerns remain. One of these areas relates to online disclosures.
While the CARD Act requires certain disclosures to appear on monthly statements, those consumers
who pay their bills online may never see the disclosures. We will be monitoring the steps
that card issuers take to provide consumers with these beneficial disclosures when they
access their accounts in different ways, and there’s a more general issue for the Bureau
in terms of how to handle online disclosures generally that we are thinking hard about. Fifth, we are concerned about the quality
of disclosures that are made about rewards products. Many consumers are picking their
credit cards based on rewards programs. These offers, however, can be highly complex, as
consumers may face detailed and confusing rules about how they can actually use their
rewards. We will be reviewing whether rewards disclosures are being made in a clear and
transparent manner, and we will consider whether additional protections are needed. Lastly, we are concerned about the disclosures
used to inform consumers about grace periods. Most cards allow consumers to avoid paying
interest on purchases when they pay their balance in full each month. This period between
the end of a billing cycle and the payment due date is called the “grace period.” We
want to make sure that consumers know that once they carry a credit card balance into
a new month, they no longer have a grace period on new purchases. While we have not yet studied
the level of consumer understanding about grace periods and how they work, it is an
area that merits our future attention. Our CARD Act report was a comprehensive undertaking
which showed that on the whole, the CARD Act accomplished a number of its intended goals.
Based on the information we have available to review changes in the credit card market,
the Act eliminated many unfair fees, made some market practices more transparent, paved
the way for easier comparison shopping, and created a market where consumers can see the
costs up front. These changes are critical to strengthening consumer protections in the
marketplace and helping us rebuild our economy. Today’s report was based on extensive research.
We looked at data spanning the period from before the law was passed through December
2012. To dispel any myths, let me just say that we use anonymized industry data to better
understand how the markets are working. We never receive a card holder’s name or other
direct or unique identifiers. We never receive information describing the specific transactions
on any account, and we do not monitor any individual’s financial transactions. We are
interested only in market trends, and as a result, the data is limited to items like
interest rates, account balances, total purchases, total payments, and fees charged to consumers. In fact, for purposes of this report, industry
participants submitted to us analyses they developed from similar data. Without all of
this information, we would not be able to study the market, to understand the benefits
of the CARD Act, and to flag areas of possible risk to consumers. In short, we would not
be effective in carrying out the responsibility to report to Congress and to the American
public. Today, I am looking forward to vigorous discussions
about the state of the credit card market and the impact of the CARD Act on both consumers
and the industry. Thank you all for joining us. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Director Cordray. At this time, I would like to invite Deputy
Director Steve Antonakes, Assistant Director Marla Blow, and our distinguished panelists
to please take the stage. As the panelists are making their way to the
stage, I am just going to take a moment to thank those joining us by live stream and
to remind folks that they can follow us via Twitter or Facebook, and you can also file
a consumer complaint at, by U.S. mail, by fax, or by calling 1-855-411-2372. Before we get started with our panel discussion,
let me introduce Marla and Steve. Marla Blow is the Assistant Director of the Card and
Payment Markets office at the CFPB. She joined the Bureau in January 2011, following 8 years
at Capital One. Her experience at Capital One included work in the risk management,
finance, marketing, and corporate development teams. Before joining Cap One, she held a
variety of capital markets and investment banking roles on Wall Street. Also joining today’s panel discussion is Steve
Antonakes. Steve Antonakes joined the CFPB in November of 2010 as the Assistant Director
of Large Bank Supervision and was named the Associate Director for Supervision, Enforcement,
and Fair Lending in June 2012. His background includes more than two decades as a financial
services regulator. In September, he was also named CFPB’s Deputy Director, along with his
continuing role as Associate Director for Supervision, Enforcement, and Fair Lending. Marla and Steve, you have the floor. MARLA BLOW: Good morning. It is a pleasure
to be here, and in this beautiful space, I am appreciating Chicago. And I just want to
do a little bit to frame up the conversation and then introduce the panelists, and then
we’ll begin with some questions and give the panelists an opportunity to make some opening
statements and opening remarks, and then we will proceed with the conversation. But I just want to lay the groundwork for
why we did this report. As Director Cordray mentioned, it was required in the statute.
It is something that we will be doing every 2 years, but this is the first one, and it’s
time to coincide with 2 years from the last major implementation date of the ability-to-pay
provision of the CARD Act, and that timing was October of 2011. So as a result, we targeted
releasing our report October of 2013, and that way, here we are today. There were specific topics that were listed
in the statute as areas that we needed to contemplate and look into and report on. They
were the terms of credit card agreements and the practices of credit card issuers and how
they have changed in the wake of the CARD Act. It’s the effectiveness of disclosure. One
of the big parts of the CARD Act was some new disclosure requirements, and we did what
we could to look at the impact of those disclosures. The adequacy of protections against unfair,
deceptive practices. Director Cordray called out a number of the areas that are still remaining
concerns. Those are things that we identified as a result of taking a look at what we thought
the adequacy protection is today. The extent to which and whether the implementation
of the Act has had an effect in a number of areas. One, on the cost of credit, and that
is whether there’s been any meaningful increase in particular that credit—one of the big
criticisms of the CARD Act was that it would make credit more expensive, that consumers
would end up actually having to pay more, and one of the things that we—that as mentioned
have already determined is that in fact that was one of the things we did not observe,
that on a per-dollar borrowed basis, consumers actually are paying less. That is driven primarily
by the limitation on penalty fees. We’ll have an opportunity to talk about that potentially
in a little bit more detail. In addition to that, we were asked to look
into the availability of credit. One of the other charges was, with all these changes
brought about by the CARD Act, there will be less credit, period. We mentioned earlier
there has been a change in the availability of credit; that has been a reduction. But
credit remains plentiful, and unused credit lines still stand at $2 trillion, as mentioned.
And importantly, about $40 billion of that $2 trillion is available to consumers with
subprime credit scores. So again, that market was an area where there was significant expressions
of concern that that is a place where there will be the most sort of disproportionate
impact, but with $40 billion still of unused credit available in that space, there is still
certainly activity there. We were asked to look at the use of risk-based
pricing, which is a practice of assigning interest rates on the basis of the creditworthiness
of the applicant, and we found that risk-based pricing actually does continue. And there’s
more detail, but part of the concern was that this would require some standardization or
that everybody would need to get with the same interest rate, and that would in effect
raise interest rates, particularly for consumers that had better credit scores. And what we
found is that risk-based pricing actually does continue, and that there is still ample
stratification of the credit card market. And then the last thing we were asked to look
at was innovation, and one of the charges was that the CARD Act would essentially put
a lid or sort of quell innovation in this industry. And we make some remarks on that.
Innovation is a difficult thing to measure, and it’s somewhat in the eye of the beholder.
But we did take a look at some of the things that have changed and the ways in which the
credit card market has capitalized on social media, new technologies, other opportunities
in the market to really change and innovate around communication and interaction with
consumers. So that’s a high level, sort of—those are
the topical areas in the report and very high-level findings of what you can find in there. Let me turn to introducing the panelists and
thank everybody for joining us. I will start with Lauren Saunders, who is on my left, your
right. Lauren is the Managing Attorney at the National Consumer Law Center, where she
handles legislative, administrative, and other advocacy efforts in the financial services
area. She has testified before Congress and contributes to several NCLC manuals, including
Consumer Banking and Payments Law, Fair Credit Reporting, Fair Debt Collection, and Foreclosures.
She previously directed the Federal Rights Project of the National Senior Citizens Law
Center, was Deputy Director of Litigation at— LAUREN SAUNDERS: Bet Tzedek Legal Services. MARLA BLOW: —Bet Tzedek Legal Services—thank
you. I apologize—and was an associate of the public interest firm Hall & Phillips.
She graduated from Harvard Law School where she was Executive Editor of the Law Review
and holds a master’s degree in public policy from the Kennedy School, as well as BA from
Stanford University. Thank you, Lauren, for joining us. David Yen, right next to Lauren, Supervisory
Attorney at the Legal Assistance Foundation of Chicago. David serves as Supervisory Attorney
for Legal Assistance Foundation of Chicago. He previously worked for Legal Services Corporation
of Alabama, which is now known as Legal Services Alabama. He specializes in bankruptcy cases
and is a graduate of the University of Pennsylvania. Ed Mierzwinski has been a consumer advocate
in the Washington, D.C.-based federal lobbying office of the National Association of State
Public Interest Research Groups since 1989. He frequently testifies before both Congress
and state legislatures and has authored or coauthored numerous major reports on a wide
range of consumer issues, including financial reform, cable television rates, telecommunications
reform, banking, financial services, and identity theft and product safety issues, including
toy and playground safety. Mr. Mierzwinski is a founding member of the Trans-Atlantic
Consumer Dialogue and represents U.S. PIRG on the TACD Steering Committee. Turning to the other side of the panel, on
the far right, we have Sanjay Sakhrani. Mr. Sakhrani covers a diversified financial sector,
with specific focus on credit card issuing and payments companies at Keefe, Bruyette
& Woods. Prior to KBW, Mr. Sakhrani was at Calyon Securities, where he followed the specialty
in mortgage finance sectors. He also spent 5 years within Citigroup’s U.S. Equity Research
Department’s Specialty and Mortgage Finance Team. He has a BS in finance from St. John’s
University and an MBA from Cornell. Mr. Sakhrani has been recognized as one of the leading
analysts in the consumer finance industry. He took the top spot in institutional investors’
All America Research Team in 2012, after finishing as a runner up in the prior year. He has also
been named at a top stock picker in Wall Street Journal’s Best on the Street survey and placed
prominently in recent Greenwich Associates’ annual rankings. Next to Sanjay, we have Mary Dunn. Mary Dunn
is the Senior Vice President and Deputy General Counsel in the Credit Union National Association’s
Washington, D.C., offices. Ms. Dunn is the Chief Staff Liaison to CUNA’s Examination
and Supervision Subcommittee and to the CUNA Federal Credit Union Subcommittee. She’s also
a liaison to the CUNA Governmental Affairs Committee and Community Credit Union Committee.
She writes a bimonthly column for CUNA’s Credit Union magazine and oversees the production
of CUNA’s reg watch and regulatory analyses on all proposed and final regulations affecting
credit unions, as well as Operation Comment, CUNA’s website to facilitate comments from
the credit union community to regulators. And next to Zixta, we have Bill Johnson. Bill
is the CEO of Citi Retail Services, the division of Citi’s global consumer banking business
that provides consumer and commercial credit card products, services, and integrated retail
solutions to national and regional retailers across the United States. The business services
nearly 90 million accounts for a number of iconic brands, including the Home Depot, Macy’s,
Sears, Shell, and ExxonMobil, among others. Mr. Johnson is also responsible for the operational
risk management and risk operations, functional utilities, supporting all four of Citi’s North
American consumer businesses. These utilities which focus on driving effectiveness and efficiency,
while protecting the Citi franchise, were established in May of 2013. Please join me in welcoming all the panelists. [Applause.] ZIXTA Q. MARTINEZ: At this time, we want to
invite the panelists to just give us a very quick overview of their general observation
in connection to our CARD Act, and why don’t we start with Lauren, and then we’ll kick
it off with Sanjay. LAUREN SAUNDERS: Okay. Thank you for the opportunity
to be here today and to talk to you all about this very thorough and very interesting evaluation
of the CARD Act. I worked on the CARD Act, along with a number of other people—I’m
sorry? MARLA BLOW: Pull your mic closer. LAUREN SAUNDERS: Oh. And it is so helpful to have this report to
be able to look back retrospectively at its impact, and I can say, you know, I think it
really shows how the absence of smart regulation to protect consumers can at times lead to
a race to the bottom and the wrong kinds of competition, and that the presence of smart
regulation helps everybody, both consumers and the industry. Before the CARD Act was passed, there was
this race to the bottom, all sorts of competition at the front end about APRs and rewards, but
at the back end, a lot of people were trying to figure out how to ding consumers with back-end
fees, retroactive interest rate hikes, and other manipulations that consumers didn’t
really understand. Not only did these practices harm consumers, they also harmed the better
players in the industry who tried to avoid them, because they didn’t get the benefit
of doing something in a straight, honest way if their competitors were making a lot of
money by engaging in tricks. Citi, for example, announced that it would not hike interest
rates for consumers who were paying on time, just because something else happened in the
rest of their market, and yet the rest of the industry for the most part didn’t follow
that, an obscure issue that consumers couldn’t understand. So we think that it has definitely
helped people to understand their cards, and it shows how regulation can work. ZIXTA Q. MARTINEZ: Thanks, Lauren. David. DAVID YEN: Before—let me just offer a disclaimer,
so the opinions that I give are my personal opinions and not those of the Legal Assistance
Foundation. So one of the most common kinds of cases that
we see are credit card collection cases, and in that context, it’s always been hard to
know exactly why the consumer is in the fix. Was it because of some abusive problem, or
was it just misfortune or overextension of credit? On top of that, in recent years, we
have seen a lot of lawsuits brought by debt buyers, so that it’s even harder to figure
out why the lawsuit is being brought. Sometimes they don’t even owe the money or they don’t
understand where the debt came from. But that said, I do think that we’ve seen
fewer cases where we can identify these sorts of abuses that were addressed by the CARD
Act as being the cause of the default. So it seems that our anecdotal evidence coincides
with what’s in this report. At the other end, we have clients—I talk
to clients who don’t have credit cards, and a lot of them don’t want to get credit cards
because of the things that either they’ve experienced or that they’ve heard about the
ways you can be tricked into getting in over your head. One unfortunate side effect of
that is that they are more vulnerable. When they do have a financial crisis, they don’t
have a credit card already, and they go to the worst credit providers. If any of those
are in the room, I don’t mind offending them, you know, the payday lenders, the title lenders,
and some of the really other kind of below-subprime products. So if there’s any way that—if
the market has improved as much as we—as it seems to have, I hope that eventually my
clients will be willing to get back into the credit card pool, because the other alternatives
are so much worse. ZIXTA Q. MARTINEZ: Thanks, David. Ed. ED MIERZWINSKI: Thank you, Zixta. And as Marla said, I came to Washington in
1989, and credit card problems existed in the 1990s, and credit cards were extremely
profitable throughout the 1990s. The Federal Reserve does an annual report to Congress—credit
cards, most profitable form of bank lending, end of story. But in 1999, there was a culture
change, in my opinion, when Congress deregulated banking, and the Wall Street boys came in
and said every year, you’ve got to make even bigger profits in every division, and so the
credit card companies really started to ratchet down the thumbscrews, as Director described
some of the practices. First, they went after the late pays. Nobody
cares about late pays. They simply said to the late pays, “A late fee is not good enough.
We are going to triple your interest rate.” Now, do the math. If a credit card has a 2
percent minimum payment—that’s approximately what they’ve always been—but the interest
rate is raised to 36 percent, divide that by 12. That’s 3 percent a month. Your interest
is going up 3 percent, and if you are only able to afford the minimum, 2 percent, you
are losing ground. You are ratcheting up credit card debt. Then they said, “Well, let’s have more people
pay late, so let’s trick them into paying late,” and the Director articulated a number
of the things they did, making bills do on a Sunday, saying that a bill that arrived
after 11 a.m. was late, changing the due date, et cetera, tightening the period between when
a bill was sent and when it was due. And that was a big moneymaker for the credit card companies,
but we couldn’t get Congress to listen. From 1999 to 2004, I can only recall two hearings
on credit cards, and we couldn’t even get a vote on a bill. We had bills. We couldn’t
even get a vote on a bill that we would of course lose to try to fix the system. But then the credit card companies started
to overreach. They invented what the Director called “universal default.” They said, “Even
if you’ve never been late to us, we’re going to raise your rates again, retroactive rate
increase on your existing balance to 30 or 36 percent if you’ve been late to someone
else.” And then in 2005, to show you the power of the credit card industry, despite the heroic
efforts of a coalition of labor, civil rights, consumer, and other organizations, with the
help of Professor Elizabeth Warren, the Congress gave the credit card industry this awful bankruptcy
bill that allowed them to collect more money from people who didn’t have it to pay them. But then the credit card industry made its
biggest mistake, and that was to invoke the “We can change the rules at any time for any
reason, including no-reason clause.” They raised everybody’s rates, and against the
backdrop of the financial crisis in 2006, 2007, we finally got the leverage to pass
the Act. It is an example of good legislation, good regulation that works to better align
the interests of the producers in the market with the consumers in the market, and now
we’re fortunate we have the CFPB to enforce the law. ZIXTA Q. MARTINEZ: Thanks, Ed. Sanjay. SANJAY SAKHRANI: Thank you, and good morning.
My name is Sanjay Sakhrani. I echo the previous remarks. I think the update
report was very thorough and informative. Just to give you guys some context as to what
I do for a living, I consult with the investment community on the fundamentals of the credit
card industry. Having analyzed the credit card space for about 12 years, I think the
CARD Act was certainly a piece of legislation that was very unique in—relative to other
rules that have come out over time, in that it aimed to eliminate a number of very favorable
profitability practices for the credit card industry. While there are other aspects to the law,
I’d say the key areas that impacted the issuers from a fundamental perspective were as follows,
based on our opinion: the significantly diminished ability to re-price customers, the elimination
of double-cycle billing, over-limit fee option being abolished or substantially curbed, and
caps being applied to late fees. I think the impacts that have been apparent
to us, both in analyzing the industry and listening to the key players in the industry,
are as follows. First, I think the overarching theme was that it leveled the playing field
across the space. Given the diminished ability to re-price individuals relatively dynamically
based on their credit performance and across multiple products, issuers basically bridged
the gap by raising APRs or yields fairly unilaterally across their customers, with almost a steeper
increase being seen among their better customers. So I think the disparities between APRs across
segments narrowed. When looking at some of the competitive forces
at play, pre-CARD Act, like teaser rates, I think the teaser rates have become less
prevalent and significantly less lucrative to higher end consumers. As far as the impacts from diminished pricing
flexibility and lower fee income, we think there’s two major impacts. One, it’s certainly
led to more rational pricing and less irrational competition, particularly as it relates to
teaser rates. Second, I mean, I think there’s still some
empirical evidence that the issuer’s appetite to lend to certain segments of the market
have been meaningfully curbed, relative to pre-CARD Act. As far as economic impacts to the card-issuing
space, I think it’s clear the companies have priced in the worst-case scenario, and today,
credit quality is pretty favorable, so I think the profitability is high, but I think one
should be very aware that the investment community as well as ourselves are aware of the fact
that when the economy turns for the worst, the profitability or lack thereof will be
significantly worse than we’ve seen in the past when you think about the—I’m sorry,
and then I’ll stop there. Thank you. ZIXTA Q. MARTINEZ: Mary. MARY DUNN: Yes. Thank you, Zixta, and good
morning. And thank you, Director Cordray and Deputy Director Antonakes. It is really a
privilege and a pleasure to be with you today. I’m kind of blinded by the sun, so I can’t
really see any of you out there. So if you are scowling at me or if you’re asleep, I
really can’t tell. So I’ll just continue on with my comments. But it is a pleasure and a privilege to be
here. You know, every time we get an opportunity to have policymakers in the room, we like
to talk about the distinctions that make credit unions unique, particularly with the Credit
Union Advisory Council sitting there on the second row and so many friends there. But
I think it’s very relevant for the discussion this morning. Credit unions don’t view themselves
as part of the credit card industry. We view ourselves as cooperatively owned financial
institutions that provide credit cards and other services because our members want them. Having said that, we do support and appreciate
the proactive role that the CFPB has taken in implementing the CARD Act, and I’m going
to talk a little bit more about that in just a minute. Credit unions are unique, though, because
of many factors. One of them is the way that credit unions by law can build their capital.
Every financial institution to stay in business has to have capital. Credit unions can only
build capital through retained earnings, which includes things like fees. There are costs
associated with credit card programs and other services that credit unions provide their
members; nonetheless, despite pressures to build capital from regulators and others,
credit unions work very hard to keep their costs down, including on credit cards. I’ve got a lot of statistics that I could
share with you, but bottom line, on a non-rewards card program, a consumer that uses a credit
union is going to save about $100 a year with that credit card program. That’s a big savings,
and that’s important to all of us. We do appreciate that the CFPB has proactively,
as I said before, implemented the CARD Act. CUNA, the Credit Union National Association,
which I represent, which represents credit unions across the country, supported the objectives
of the CARD Act, and we do appreciate, as the Director reported today, that the Act
is working. There are many— ZIXTA Q. MARTINEZ: Bill. BILL JOHNSON: Thank you. Pleasure to be here.
Appreciate the invitation and the opportunity to speak on our views around the CARD Act. Citi is committed to earning our customer’s
trust by offering excellent service, solutions that simplify their financial lives, and financial
products that create real value. Credit cards offer customers convenience and protections
that they cannot get with cash. Whether it’s filling the tank quickly, building up a credit
history, or replacing that broken appliance that wasn’t expected, we deliver value day
in and day out. Fundamentally, we at Citi, and I believe the industry overall, fundamentally
strive to provide our customers with easy-to-use credit tools to help them manage their lives. To that end, we support the CARD Act in its
efforts to create consistent, understandable rules for the credit card industry. It’s our
believe that the credit CARD Act has generally improved the credit environment for consumers
by increasing transparency to the cost of credit through better and more consistent
disclosures and in creating consistency in application and assessment of certain fees,
such as over-limit and late fees. However, I think as noted in the CFPB’s report, it
is difficult to discern the impact of the CARD Act on the cost of credit or on the availability
of credit, as the data is open to different interpretations, and the time period involved
was extremely volatile. The industry understand significant change to the CARD Act itself,
multiple accounting changes, the Great Recession and the economic effects of that and high
unemployment, and the increasing capital requirements. It will be sometime before we better understand
the cyclical and permanent changes that have occurred and more clearly determined the cause
and effect. That said, we believe that a good relationship
with the CFPB is in the interest of the industry and the better public policy. The best example
of this is the CFPB’s recent efforts in the area of ability to pay. I think that was an
area where the industry provided the appropriate data and instance of issues in which the CFPB
responded, and the changes worked. We believe that continued collaboration with
CFPB benefits consumers and the industry. A balanced approach that focuses on consumer
protection and creating broad, equitable access for every customer can be achieved through
a thoughtful working relationship that fosters ongoing discussion and seeking solutions that
benefits all parties. ZIXTA Q. MARTINEZ: Thank you, Bill. STEVE ANTONAKES: Great. So good morning. Good
morning, everyone. Thank you for coming. I want to thank our panelists especially. My first question is for Sanjay, Mary, and
Bill, and I would ask you all to take a few moments to describe the state of the competition
in the credit card market today on what features are participants competing, and in your views,
to that regard, what features do you choose to highlight, and which of these features
resonate the most with your consumers? So really, first and foremost, talk about competition
in the credit card market and what features you believe are most important. Sanjay, we
can start with you. SANJAY SAKHRANI: Yes. I think that’s what
I mentioned in my prepared remarks, was there is empirical evidence that the credit card
companies are focusing away from certain segments into others, and I think one of the prominent
trends we’ve seen is the issuers are really focused on the transactor, super prime-oriented,
good credit customers, so there’s a lot of competition in the rewards base by virtue
of that. I think, secondarily, where there is a propensity
to want to lend to consumers, I think you’ve seen issuers compete and market products that
are specific to pricing transparency, so some examples of that are Discover and Citi’s Simplicity
card. I think those are cards that kind of market themselves as being very convenient
and price-conscious to consumers. So I think that’s where we’re seeing a lot of the marketing
offers in terms of the lenders, and I think that’s what’s resonating well with consumers,
because you are actually seeing growth in those segments. MARY DUNN: Yes. Well, credit unions really
don’t see themselves as competing with banks, for example, in the credit card space. What
they are trying to do is look for ways to offer programs that their members will benefit
from, and they do that by looking at the fees and the terms. Rates have crept up a little bit, but credit
unions have really tried hard to minimize those fees wherever possible, and I think
that’s one of the biggest values that credit unions can offer. BILL JOHNSON: Generally, competition remains
relatively robust, in that everybody continues to participate and pursue growth. At the same
time, comparative to past years, it’s constrained. It’s constrained as the revenue streams that
had previously existed have fallen away and as the issuers have had to change a focus
around this new regulatory and operational controlled environment, where we’ve invested
significantly in those areas. I think the areas in which we compete continue to be primarily
around rates and in rewards and the traditional benefits. One of the things I know the industry is looking
at and you see more of is looking for the emotional connection with customers, what
are the things that excite them, what are the things that cause them to act and behave
in a way that we can create and deepen our relationships with them. We don’t see our
customers as just purely a transaction, but as a customer with which we want to build
a deeper, broader relationship and service them with the right products. STEVE ANTONAKES: Great. Thank you. MARLA BLOW: So I’m going to ask a question
of the Consumer Panel, Consumer Advocates Panel, and, David, this one is specifically
for you. How would you describe the satisfaction level of consumers with their credit cards,
and has that changed over time? And if you could have any insight or thought on what
might have led to those changes, what might be driving changes in consumer satisfaction
with credit cards. DAVID YEN: Well, I think I’m somewhat handicapped
because most of my clients—well, all of my clients are either low income or elderly,
and I think a lot of them have been self-selected to selected by the credit card companies.
The ones who were sort of marginal, they couldn’t keep up their relationship with the credit
card. So the ones—clients I have who still have
credit cards are pretty happy with them, but I think a lot of my clients 2 or 3 or 4 years
ago were just on the edge, and that any little thing would push them to the point where they
couldn’t keep up with it. As I said before, I don’t see a lot of the
low-income clients entering the credit card market again. I think they think they are
not going to get a credit card, so they don’t even bother applying. MARLA BLOW: Thank you. ZIXTA Q. MARTINEZ: This next question is for
Sanjay. What do you see as an opportunity for innovation in this market, and what has
been the most compelling recent innovation? SANJAY SAKHRANI: Well, I mean, the credit
card technology is a very mature one, and I think the problem has been, you know, when
thinking about making changes, whether or not the benefits outweigh the costs associated
with making changes. You know, it’s pretty simple to go out and
swipe a card and walk away and purchase something, so I think that’s been the biggest precluder
for innovation, but I think some areas where there has been some innovation has been around
data security. Obviously, what’s happening in the United States is we’re moving, I believe,
to EMV technology, so chip-based technology that’s used internationally is moving to the
United States, and I think the argument for it has been that fraud will find its way to
the area where there is the least resistance. And today, it’s the United States, which is
relatively less secure because we don’t use the chip technology and other countries do. So I think we’re seeing some innovation around
data security and enhancements in cards. There is this whole idea of tokenization, which
is given the increased prominence of electronic transactions, card issuers and networks are
working together to try to make it easier for people to transact online. And I think
another area where there’s innovation from the issuers as well as the networks that work
with the issuers is around digital wallets and using data from marketing and loyalty-based
programs. So I think using the data that they collect from consumers with their permissions,
obviously, and utilizing it for their benefits and giving them more value, I think is an
area that the issues are definitely looking into. ZIXTA Q. MARTINEZ: Thank, Sanjay. STEVE ANTONAKES: Ed, in your view, which aspect
of the CARD Act has had the greatest positive impact no consumers? ED MIERZWINSKI: Well, Steve, first of all,
I’ll just give a two-part answer. I didn’t talk before about the benefits to students,
of the student provisions. There’s a group that did a lot of work in identifying unfair
campus marketing. We were very pleased to find that the report found that those provisions
work. But I think the most important provision of
the CARD Act is the package of provisions that make it easier to pay your bill on time
and prevent banks from unfairly, retroactively charging higher interest rates to your current
balance. That package is very important, and it’s really helped consumers. STEVE ANTONAKES: Thank you. MARLA BLOW: Bill, a question for you. How
has consumer behavior changed? So as in your observations post-CARD Act, in particular,
do you see changes in consumer payments or in other ways in which consumers are using
credit cards? BILL JOHNSON: You know, it’s a mix. Using
the CFPB’s definition of “prime,” “super prime,” what we’ve seen is in the subprime—the super
prime customer reentered the market and began spending about 18 to 24 months ago, and they
spent pretty robustly and have continued to return, continued to spend. What we find is that the prime and subprime
customers have been constrained. They have not been spending at the same level as they
did previously, and they had not up until the last 90 days shown any recovery there.
Now, whether that is a byproduct of the CARD Act or the recession, I think that’s for brighter
minds to determine to go through there. I would say that as the economy stabilizes,
consumer confidence has improved, and the home values have stabilized as well. We see
some early indications that mid consumers, the prime and the subprime customers, starting
to come back in and spend a little bit. As it specifically relates to payment rates,
I think we often think about payment rates in terms of the amount of payment relative
to the size of the outstanding. My experience, customers tend to—don’t budget that way.
They budget as to pay how they can afford, and there’s ample evidence that their payment
behavior has continued to be relatively constant. The amount of their monthly payments has not
changed materially. However, as a percentage of the outstanding balance, absent the spend,
it has increased. So you’d see a payment rate increase, but I don’t believe that’s an intent
to increase payment rate as much as it is the budgeted amount that I normally pay is
just a growing percentage of an outstanding balance, as I don’t replenish my payment with
new spend. But again, in the last 90 days, there’s been
some evidence that we would say that those lower—the subprime and the prime customer
are beginning to reengage in the marketplace. MARLA BLOW: Great. Thank you. ZIXTA Q. MARTINEZ: All of the panelists have
either directly or indirectly touched on this question, but I wondered if Lauren could share
some additional specificity here. What do you think is the biggest remaining consumer
protection concern in the credit card market? LAUREN SAUNDERS: Certainly, overall, consumers
are much happier with their credit cards, and you can see that on a number of levels.
Surveys like J.D. Powers show better satisfaction. Complaints to consumer advocacy organizations
are way down, and complaints to customer service offices in the credit card companies themselves
reflect much better satisfaction. That said, of course, the market is not perfect,
and there are still problems out there that need to be addressed. Your report touched
on a number of those, and we agree that credit card add-on products, fee harvester cards,
and deferred-interest cards that hit people with a bit retroactive interest payment if
they miss that payment date remain big problems. But I would say the biggest overall program
is that it is still too easy to get way over your head in credit card debt and still too
hard to get out of it. We’ve made some strides in that area. Certainly, better tailoring
of credit to the younger adults based on their income has helped, and an overall ability-to-pay
requirement has helped. But I think we need bigger minimum payments, so people can pay
off their credit cards faster, more flexibility for people who get into trouble, and less
marketing to people who are clearly over their heads and can’t handle more credit. STEVE ANTONAKES: Great. So I have the last
question for the panel. It’s for Mary, and, Mary, I would ask for you to tell us in your
view what the biggest challenges are for the credit union industry on a going-forward basis. MARY DUNN: So thank you, Steve. I actually
think there are two. One of them is remaining nimble enough to provide the services that
our members want, when there are so many options out there in the marketplace. And so the second concern is really a concern
that we share with I think the CFPB, and that is how to make sure that consumers are adequately,
maybe even more than adequately protected, while at the same time allowing financial
institutions to do their job to provide services in the marketplace. ZIXTA Q. MARTINEZ: What a terrific conversation
we’ve had. It’s been varied. We really appreciate it. At this time, I ask all the guest panelists
to please rejoin the audience. We are about the start the audience participation part. [Pause.] ZIXTA Q. MARTINEZ: A number of audience participants
have signed up to share comments and observations. It looks like a mic is coming. Oh, there it
is. Let me start all over. It’s now time for our
audience participation part, and a number of you have signed up to share comments, to
share your observations, and really to tell us what you think. It’s also a very important
part of what the Bureau has been doing from the very beginning. We make it a point to
get outside of Washington, D.C., and hear from folks directly. We want to know what’s
happening in your customers in the consumer finance market space. We have a few of you that have signed up.
We typically encourage folks to spend about 2 minutes telling us their thoughts, because
we want to make sure that everyone who signed up has the opportunity to speak their mind. So I’m going to start with the first participant.
Spencer Cowan. Chris or Julian [ph] will bring a mic to you. SPENCER COWAN: Thank you, Director Cordray
and the CFPB staff, for holding this hearing on the credit CARD Act. I am Spencer Cowan,
Vice President of Research, at Woodstock Institute, a research and advocacy nonprofit focused
on issues of fair lending, wealth creation, and financial systems reform. The CARD Act was passed to limit the worst
practices of credit card issues, and the report you released today demonstrates that it has
succeeded in doing just that, limiting the worst practices. The CARD Act success is due
in no small part to CFPB’s commitment to holding credit card issuers accountable. We thank
you for your enforcement actions against Chase for charging consumers for services they did
not receive and the action against Discover for deceptive marketing practices regarding
add-on products. These enforcement actions show that add-on products, such as identity
protection and credit monitoring, provide little real value to consumers and are being
deceptively marketed. In addition to taking action when issuers push products on consumers
without their knowledge, we urge the CFPB to assess whether these add-on products are
unfairly or predatorily priced, given the minimal value that they provide. The CARD Act also limited the total fees that
issuers of fee-harvester cards can charge. Those issuers, however, are still charging
exorbitant up-front fees that can eat up more than half of the available credit before borrowers
even use the card. Since fee-harvester cards are targeted at low-income consumers with
low credit limits, the high up-front fees can trigger inadvertent over-limit charges.
The CFPB should, if possible, restrict the total amount of up-front fees issuers can
charge to 25 percent of the total credit limit. Finally, many consumers cannot qualify for
credit cards and look to high-cost, small dollar lenders to access credit. We look forward
to the CFPB’s rules regulating this market. Our experience in Illinois demonstrates the
importance of enacting consumer protections for all high-cost, small dollar loans, not
just balloon payment loans. After Illinois regulated small dollar, balloon payment loans
in 2005, payday lenders began offering longer term installment loans with high APRs to get
around regulations. ZIXTA Q. MARTINEZ: Thank you, Mr. Cowan. SPENCER COWAN: Thank you. ZIXTA Q. MARTINEZ: Lucy Mullany. LUCY MULLANY: Thank you so much for the opportunity
to talk to you today. My name is Lucy Mullany, and I serve as the Senior Policy Associate
at Heartland Alliance for Human Needs and Human Rights. I also coordinate a statewide
coalition called the Illinois Asset Building Group. My testimony today is on behalf of
IABG. It’s a statewide coalition made up of organizations providing and advocating for
financial empowerment opportunities. As you consider credit issues today, we ask
that overdraft and credit be prohibited from prepaid cards, a product that many of our
participants utilize. Consumers able to manage credit can access checking accounts, credit
cards, and other credit products. For those who cannot, prepaid cards need to stay a safe
option. Furthermore, allowing credit features on prepaid
cards will diminish the impact of state payday and usury laws and existing military lending
protections. Payday lenders could use the cards, the prepaid
cards to avoid rate caps and make payday loans in states where the loans are illegal. Finally, under no circumstances should overdraft
be allowed on a prepaid card. It takes away from the nature of the product, and as we
have seen with other banking products can be an abusive fee for many consumers. We understand
that issuing rules for prepaid cards is a priority for the CFPB. When you do issue rules,
we strongly urge you to prohibit credit products and overdraft fees on prepaid cards. Finally, we do want to say that the Consumer
Complaint Database has been extremely helpful in identifying problematic practices for a
number of financial products, but we would like to see the CFPB expand the database to
include other products like payday loans, consumer installment loans, and auto title
loans. ZIXTA Q. MARTINEZ: Thank you, Ms. Mullany. James Roddick. [No response.] ZIXTA Q. MARTINEZ: Angie Robertson. ANGIE ROBERTSON: Thank you. I am a private
consumer attorney, and I file cases under the Fair Debt Collection Practices Act. I
have experienced with many of my clients that there are, as Director Cordray explained,
legalese in the contracts they sign with the credit cards that contain binding arbitration
agreements, and I understand that part of the Dodd-Frank Act required a study on the
use of arbitration. And so I would encourage the members of this panel to set dates and
educate the public on when that study is going to occur. ZIXTA Q. MARTINEZ: Thank you, Ms. Robertson. Jerome Lamet. JEROME LAMET: I represent 15,000 seniors and
disabled individuals who are drowning in debt. A little history, you will understand what
I am going to recommend here. In 1998, I as a Chapter 7 bankruptcy trustee, and I saw
people who could not afford a bankruptcy, who were being abused by the debt collection
industry. So I started a substitution for bankruptcy, which is Debt Counsel for Seniors
and Disabled, which you will find on the Internet at But my comments are as follows. A little bit
of history. I spent 27 years with the Federal Trade Commission. I was the Assistant Regional
Director here in Chicago, and one day in the ’70s, I got word from Washington that I was
to attend meetings in the four states I was responsible for. What were these meetings?
The meetings were with the legislators who said—and the banking industry, who the banking
industry came to the legislators and said to them, “We want you to exclude from your
usury statutes credit cards, and don’t worry about them going too high. Competition would
keep them low.” I went back to my office. I called headquarters
and said, “Don’t believe this. They are going to skyrocket.” Right now, my average client’s
income is $1,200 a month. Their credit cards are 23 percent interest. They can’t pay them.
That’s the loan shark interest. What I think is the most important thing right now is for
the Bureau, for the government to consider returning to the 1970s. In the State of Illinois,
if I want to lend you money, the most I can charge you is 6 percent, instead of the 23
percent that the credit card industry is allowed to pay. So I think we are completely ignoring
the fact that we have got to repeal what happened in the 1970s and return to the usury statutes,
which incidentally are as old as the Bible. ZIXTA Q. MARTINEZ: Thank you, Mr. Lamet. Ruth Elzey. [No response.] ZIXTA Q. MARTINEZ: Theresa Amato. THERESA AMATO: Good afternoon, and thank you
for coming to Chicago to hold this hearing. My name is Theresa Amato, and I am the Executive
Director of Citizen Works and its Fair Contracts Project. And I wanted to comment on Director Cordray’s
six categories of transparency that still need work and hopefully put a seventh one
on there, and that is to echo the comments of this consumer advocate here. Some of the
terms that are not directly related to fees or pricing, but do have an impact on consumers
everywhere, such as what are the dispute resolution mechanisms, is there binding forced arbitration,
what choice of law applies in those circumstances, what exactly is the contour of a unilateral
modification provision—for example, can they just change the terms at any time, and
how and to what extent, and why do we have these kinds of provisions in these? In these
agreements, people can’t find them easily, and I’ll give you just an anecdote. In February of this year, I was trying to
find out the terms of a big bank’s dispute resolution mechanism. I went online. I couldn’t
find it. I could find the fees, the APR, all that. I couldn’t find the dispute resolution
mechanism. I called the online specialist. I was told that there’s an international agreement,
and so all MasterCard/Visa had forced dispute—forced arbitration in their agreements. And then
I said, “Well, I’d like this particular contract,” and I was told I had to go to my local bank. I went to my local bank. It took them an hour
and a half to find out what was in their contract. They didn’t actually have a copy of that contract
for that credit card in the bank. They had to call up the food chain of a large bank,
and still, they said, “Well, we think it’s a case-by-case resolution.” I said, “I highly
doubt that.” And I’m lawyer, and it took me 2 hours to figure out. Finally, the organization that offered the
card was able to tell me a week later. ZIXTA Q. MARTINEZ: Thank you, Ms. Amato. Appreciate
that. I am going to try Ruth Elzey again. [No response.] ZIXTA Q. MARTINEZ: How about James Ruddick? [No response.] ZIXTA Q. MARTINEZ: I’ll take this opportunity
to remind folks that our Consumer Complaint Center is taking complaints today. You can
reach us at 855-411-2372. You can follow online at, by U.S. mail, or fax. That concludes the field hearing at the Harold
Washington Public Library in beautiful downtown Chicago. Thank you all for taking the time
from your busy days to join us here today, and thank you all who joined us by live stream.
Have a great afternoon. [Applause.]

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