Credit Card Disclosures: The Devil Is in the Details

New credit card applications are the lifeblood of payments. The application is the entry point for new customers and for those who desire to change issuers or credit card plans within an issuer. The credit card application, whether from a direct mail, digital, or mobile channel, triggers a credit investigation that ends with approval or denial.

Pricing the credit card requires scrutiny and process control to ensure acceptance and cardholder repayment, calibrating the lender’s risk appetite and the prospective card member’s risk profile. Since the Credit Card Account and Responsibility Act of 2009 (CARD Act), credit card issuers may not dynamically re-price accounts. Any change to terms requires hurdles of notifications and termination options for the consumer and lender. For this reason, it is essential that credit card issuers price card terms right at the acquisition point.

The Consumer Financial Protection Bureau (CFPB) announced they are interested in better understanding credit card pricing and disclosure strategies. This report discusses the current  environment, explains the logic behind the CFPB strategy, and presents a plan for credit card issuers to prepare for actions that the CFPB might require.

This report is 21 pages long and has 8 exhibits.

Companies mentioned in this report include: FICO, TransUnion.