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Confusing credit card disclosures can cause overwhelming debt

One of the reasons that consumers found themselves in trouble due to credit card debt is because they did not fully understand the terms of their agreements with their credit card companies. Regulators believed part of this problem was the convoluted legal language of credit card company disclosure forms. Difficulty in understanding how credit card companies levy fees and interest charges had put many consumers into overwhelming debt in Texas and other states.

The U.S. Consumer Financial Protection Bureau (CFPB) has been keeping a close eye on disclosures given to consumers by credit card companies ever since the passage of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. Although the law did not require credit card companies to simplify their language on their disclosures, the CFPB noted the improved readability of disclosure forms from credit card issuers. The disclosures of the largest credit card companies have decreased by an average of over 2,000 words, according to the CFPB.

The increased readability of the disclosures will make credit cards more accessible to everyday consumers, since they will be better informed about potential fees and interest charges. However, the CFPB plans to continue vigilance in the area of application fees charged by credit card companies. The CARD act makes it illegal for credit card issuers to charge upfront fees more than 25 percent of the total credit limit of a credit card.

Despite the increased oversight from the CFPB, many consumers may still find themselves facing overwhelming debt as a result of credit card fees and interest charges. Although these may be challenging times, there are still options for consumers in Texas and elsewhere to responsibly confront these financial challenges. One available option would be to file a personal bankruptcy which may potentially discharge most -- if not all -- credit card debts.

Source: Bloomberg, Bank Credit-Card Fees Face New Scrutiny by Consumer Bureau, Carter Dougherty, Oct. 2, 2013

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