Addressing the Credit Card “Crisis” Regional Inter-Agency Committee Forum May 20, 2009

1. Addressing the Credit Card “Crisis” Regional Inter-Agency Committee Forum May 20, 2009 Louise A. Rynd 1

2. Addressing the Credit Card Crisis • What Banks are Doing • Reaching out to customers they identify as may be • struggling with credit card payments • Making appropriate adjustments • - Lowering interest rates • - Forgiving interest • - Reducing principal • Providing resource “Help With My Credit” 2

3. Addressing the Credit Card Crisis 3

4. Addressing the Credit Card Crisis • Interest Rates • According to the Federal Reserve Board: • From end of first quarter 2008, to end of February 2009, rates for revolvers down about ¼ point • Average rate for revolvers end of February 13.54 • Rates relatively low 4

5. Addressing the Credit Card Crisis • Current Trends • Rates for some borrowers increasing especially • those with relatively low rates compared with the • average 13.5 • Accounts closed, limits lowered for some borrowers • Stricter standards for new accounts 5

6. Addressing the Credit Card Crisis • Why is credit less available?Why are interest rates for some going up? • Economy and nature of credit cards. - Everyone less creditworthy • - Unemployment up • - Credit cards are riskiest type of loan • - More people unable to pay • - Previous funding sources are scarce or more expensive • * See handout re profits 6

7. Addressing the Credit Card Crisis • How can rates change? • Automatic increases based on behavior • - Disclosed in application under box • - Reasons triggering increase must be explained in detail • Change in terms • - Advance notice • - Choice to opt-out in most cases and pay off • balance over time at original rate 7

8. Addressing the Credit Card Crisis • UDAP Credit Card Provisions • APR increases on existing balances restricted • Exceptions: • Increases disclosed at account opening • Variable rate changes • 30 day delinquency • Work-out arrangement • Any transaction made after first year with notice • Advance notice: transactions made 7 days after notice of change in terms 8

9. Addressing the Credit Card Crisis • UDAP Rule’s Credit Card Provisions • Time to make payment • Payment may not be considered late for any purpose unless consumer has had reasonable time to make payment • Mailing or delivering statements 21 days before due date is considered reasonable • Provision does not apply to “interest-free” period (grace period) to avoid paying interest 9

10. Addressing the Credit Card Crisis • UDAP Rule’s Credit Card Provisions • Payment allocation • When different APRs apply to different balances, amount in excess of required minimum must be applied either high to low or pro rata 10

11. Addressing the Credit Card Crisis • UDAP Rule’s Credit Card Provisions • Two-cycle billing prohibited • - One-cycle billing, or average daily balance • method permitted • Limitations on credit card plans charge security • deposit and fees in first year 11

12. Addressing the Credit Card Crisis • New Regulation Z Disclosures • Credit card applications • Account opening disclosures • Periodic statements 12

13. Addressing the Credit Card Crisis • New Regulation Z Disclosures • Credit card applications and solicitations • Revised format • Revised content • Mandatory terminology • Minimum fonts • Account opening disclosures: • Tabular summary of key terms • Only certain terms disclosed must be in writing 13

14. Addressing the Credit Card Crisis In her September 2008 State of the Sector address delivered at the NFCC’s Annual Leaders Conference, Susan C. Keating, president and CEO of the NFCC, identified improved creditor concessions as the number one Call-to-Action (CTA). Quoting from her speech, Keating said the following: “To address consumers’ need for an affordable, sustainable DMP now, we are asking ALL card issuers—by March 31, 2009— to adopt a universal, two-tiered DMP program offering either a maximum monthly fixed payment of 2 percent or a hardship payment of 1.75 percent of the balance. 14

15. Addressing the Credit Card Crisis • New Federal Credit Card Statute ????? • Industry’s concerns: • Further harm banks’ ability to meet the credit needs of consumers and others. • Limits will necessitate reductions in available credit given current economic conditions, while increasing the price of credit where it remains available. 15