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Warren wants to clarify language regarding credit card debt
Monday, 06 December 2010 15:00
The adviser appointed to help set up a federal consumer protection watchdog said that the new agency should make the simplification of language in credit card agreements one of its primary objectives.Elizabeth Warren recently gave a speech to the Consumer Federation of America in whichshe said that Washington doesn't do enough to make the risks and benefits of taking on credit card debt clear, according to a Bloomberg report. Warren, the Harvard Law School professor appointed by President Barack Obama to head up the operation of establishing the Consumer Financial Protection Bureau, believes this should be one of the CFPB's top priorities.
"It is this simple: No customer should be asked to take out a loan without knowing the costs or the risks of the deal," she told the group, according to the news source. "And every customer should be able to compare different financial products straight up."
Warren also noted that the current regulations set forth by the Credit Card Accountability, Responsibility and Disclosure Act of 2009 don't do enough to change the way credit card companies operate, the report said. Since the law was passed, many lenders have sought ways to skirt the rules related to how they handle consumers' credit card debt.
One of the primary problems consumers have faced since the new federal regulations were passed is that lenders have simply set up more complex pricing rules for existing credit card debt, the report said. In addition, simply mandating increased disclosure of fees doesn't necessarily mean that the agreements will automatically be easier to understand.
For example, Warren believes the purpose of the so-called Schumer Box, which lists all fees and charges related to credit card debt on a particular account, has already been rendered somewhat irrelevant, the report said. Lenders have intentionally muddied the wording in the box to make it difficult for potential consumers to understand. Warren noted that just because there is more disclosure doesn't mean there is more understanding.
However, Warren did say that the Credit CARD Act was successful in protecting consumers in some ways, such as banning retroactive interest rate hikes on existing balances.
Many Americans have been able to reduce their total credit card debt since the passage of the protections. However, some industry experts believe declines in consumer credit may be the result of charge offs which forced many former borrowers out of the credit system altogether.
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Top Articles to Help You Lead A Debt-Free Life
- Debt Consolidation: “Debt Consolidation” is one of the most commonly misunderstood and misinterpreted personal finance strategies that consumers inquire about all the time. While some view it as a method of taking on new loans, others see it as a debt relief alternative. It is more important than ever for inquisitive consumers to have a very strong understanding of exactly what debt consolidation entails, and the impacts it can have on personal finances.
- Debt Relief: Debt relief is defined as a partial or total forgiveness of debt. When the term is used by the government, it usually refers to the forgiveness of debt to underdeveloped countries. Recently, it has begun to refer to the millions of consumers who are overwhelmed with debt seeking financial relief from their unsecured debt.
- Credit Card Debt: Credit card debt is an example of unsecured consumer debt, accessed through credit cards. Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.
- Debt Settlement: Debt settlement programs use a third party to negotiate lower balances and interest rates on unsecured debt. This type of debt management plan helps provide consumers an alternative to bankruptcy while reducing your outstanding debt.
- Credit Counseling: There are a numerous options for consumers who want to start getting their finances under control after accumulating large amounts of debt, which could inevitably lead to credit problems further down the road. Consumers who are in control of most aspects of their finances, but still feel like they could use additional help managing their debt burden, could certainly benefit from the assistance of a consumer credit counseling service.
- How Do I Get Out of Debt?: Now that the national economy is beginning to recover and people are having a better time dealing with their personal finances, many consumers who found themselves sunk deep in debt over the last few years may be asking themselves the question, “How do I get out of debt?” Fortunately, there are a number of avenues consumers can take to get out of debt, each with benefits and drawbacks depending on how quickly people need to fix their financial problems.
- 10 Tips to Avoid the Debt Trap: Have you ever thought about why so many of the people you know are struggling with debt? Do you ever wonder why banks keep lending to certain individuals, even when they are falling behind on their payments? Did you know that debt problems are a leading cause of major societal problems, such as stress, divorce and alcoholism?
- Credit Management: Many consumers are finding themselves buried under a pile of mounting debt. With interest accumulating month after month in addition to late fees being charged, many consumers are finding it difficult to make just the minimum payments on their credit cards. Although this may seem like an endless battle, with a strict budget and some discipline there are credit management strategies and solutions that will allow consumers to reduce or even eliminate their debt.
- Credit Card Debt Reduction: In recent months, many Americans have made a greater effort to seek credit card debt reduction and reduce the balances they owe, but some may not know where to start. Fortunately, there are several options available for consumers thathave a financial goal to achieve credit card debt reduction.
- Credit problems: Paying down high levels of debt is one of the best ways to improve credit problems and increase one’s credit standing. But many people cannot do that so quickly, especially in this economy. About one-third of a credit score is based off of a credit utilization ratio, which is the total creditbalances divided by the total credit limits. A great target is to use no more than 30% of one’s available credit.
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