Bank of America's 40 million credit card customers will receive a one-page summary of their rates, fees and payment information beginning this month.
Dubbed the Credit Card Clarity
Commitment, Bank of America claims to be the first bank to provide cardholders with a "clear and simple explanation of this kind."
This is the latest initiative from the Charlotte, N.C.-based
bank to simplify consumer communications and help customers understand their banking agreements. Earlier this year, Bank of America unveiled a Clarity Commitment with a simple one-page loan summary
for mortgage and home equity customers.
Each cardholder's Credit Card Clarity Commitment will include rates for purchases, balance transfers, and cash advances; payment information to keep the
account in good standing; and a summary of fees. The letter also clearly states that interest rates can change if payments are late.
The credit card industry has come under fire from consumer
advocates for hiking interest rates and cutting credit limits in advance of the Feb. 22 deadline to comply with new federal credit card reforms.
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While not mandated by the new rules, the letter
reflects the new law's aim to make policies easier to understand, which is detailed under the "Plain Language in Plain Sight" provision of the mandate. The letter states that it does not take the
place of the consumer's credit card agreement, which can be up to 40 pages long, and is written using legal jargon that is difficult for most consumers to understand.
Like its competitors, Bank
of America in recent months raised interest rates, cut credit limits and took other actions to change terms before legal reforms limit penalty fees and the banks' ability to raise interest rates.
Across the U.S., changes to interest rate and/or credit limits hit about 65% of all outstanding credit cards in the past year, according to The Associated Press.
Among the most notable changes
made by Bank of America was shifting most credit cards from fixed to variable interest rates, which fluctuate in relationship to the prime rate, according to the AP. The new law will prevent banks
from changing the fixed rate on existing balances unless the cardholder falls two months behind in paying the bill.
One important item that the letters don't spell out is how long it will take to
pay off outstanding balances if only minimum payments are made. After February, that information is required to appear on monthly statements as part of the "Plain Language" provision, which requires
very specific disclosures that help customers make informed choices.
Creditors will be required to give consumers clear disclosures of account terms before consumers open an account, and clear
statements of the activity on consumers' accounts afterwards. Model disclosures will be updated regularly based on reviews of the market, empirical research, and testing with consumers to ensure that
disclosures remain clear, useful and relevant.