For more information, please visit www.lenderlawwatch.com or www.enforcementwatch.com 13 CREDIT CARDS WHAT TO WATCH Tensions between CFPB and Congress on regulation of credit/prepaid cards | Increasing CFPB focus on credit and debit card enforcement 2017 HIGHLIGHTS CFPB Pre-Dispute Arbitration Rule Issued and Rescinded. In July, the CFPB issued and published a final rule to ban companies from using the pre-dispute arbitration agreements in contracts for specified consumer financial products, including credit cards and bank accounts. Mandatory arbitration provisions limit consumers’ ability to bring class action lawsuits and instead require each individual to initiate a separate arbitration action. The rule officially took effect in September, but would have only applied to agreements entered into after March 19, 2018. That date will never come. Under the CRA, Congress passed a joint resolution disapproving of the final rule. The joint resolution was signed by the President on November 1, 2017. The Bureau’s rule now has no force or effect, and the CFPB has since removed the final rule from the CFR. CFPB Issues Notice and Request for Information on Thirteen Credit Card-Related Topics. In March, the CFPB sought commentary from the public about how the credit card market is functioning. The non- exhaustive list of topics spanned a wide range of issues, including the effectiveness of term disclosures; adequacy of protections against unfair, deceptive, or abusive acts and practices, or unlawful discrimination; deferred interest products; subprime specialist products; areas for technological innovation; secured credit cards; rewards programs; variable interest rates; and online and mobile account servicing. Respondents submitted 33 comments by the June 2017 deadline. American Express Paid $95 Million for Consumer Relief in Connection with Discrimination Claims. In August, the CFPB entered into a consent order with two American Express subsidiaries following allegations that the companies discriminated against consumers in Puerto Rico, the U.S. Virgin Islands, and other U.S. territories. According to the CFPB, the subsidiaries engaged in discriminatory practices that included charging higher fees and interest rates; offering less advantageous promotional offers; denying credit to certain Puerto Rico applicants who would have been approved for comparable cards had they lived in the 50 U.S. states; and requiring more money to settle debts. The CFPB ultimately did not assess penalties because American Express self-reported the violations, self-initiated remediation for the harm done to affected consumers, and fully cooperated in the CFPB’s review and investigation. NetSpend Settled with FTC for $53 Million Over Prepaid Debit Cards. In March, NetSpend entered into a stipulated final order to pay up to $40 million in consumer relief and $13 million in reimbursed customer fees arising from allegations that the prepaid card provider deceived customers about access to deposited funds. The FTC focused on the marketing materials and guarantees posted on the company’s website, alleging a gap between services advertised and those offered. LOOKING AHEAD TO 2018 The CFPB’s arbitration rule would have made a big splash in 2018, but the recent Congressional resolution blocking the rule all but eliminates the initiative—for now. The move also signals that the CFPB’s ongoing interest in regulating credit and prepaid card products could be met with strong resistance from Congress and the White House. The industry should pay attention to developments from the CFPB, in particular concerning trending consumer complaints highlighted in the CFPB’s March Spotlight about dispute resolution, reward programs, late fees and servicing costs, and issues related to the issuance of credit cards.