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Credit Card Account Management

In CFPB Supervisory Highlights Issue 25 for Fall 2021, the Bureau assessed the credit card account management operations of supervised institutions for compliance with applicable Federal consumer financial laws. Examinations of these institutions identified violations of Regulation Z and deceptive acts or practices prohibited by the Consumer Financial Protection Act (CFPA).

Regulation Z contains billing error resolution provisions with which a creditor must comply following receipt of a billing error notice from a consumer. Examiners found that creditors violated the following provisions of Regulation Z:

  • 12 C.F.R. § 1026.13(c)(2) by failing to resolve a dispute within two complete billing cycles after receiving a billing error notice regarding the failure to credit a payment that the consumer made;

  • 12 C.F.R. § 1026.13(e)(1) by failing to reimburse a consumer for a late fee after the creditor determined a missing payment had not been credited to the consumer’s account, as the consumer had asserted; and

  • 12 C.F.R. § 1026.13(f) by failing to conduct reasonable investigations after receiving billing error notices related to a missing payment and unauthorized transactions.

Staff should be trained on Regulation Z’s billing error resolution requirements and relevant policies and procedures.

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Sections 1031 and 1036 of the CFPA prohibit deceptive acts or practices. An act or practice is deceptive when: (1) it misleads or is likely to mislead the consumer; (2) the consumer’s interpretation is reasonable under the circumstances; and (3) the misleading act or practice is material.

Examiners found that credit card issuers engaged in deceptive acts or practices by advertising to certain existing customers that they would receive bonus offers if they opened a new credit card account and met certain spending requirements. A consumer could reasonably conclude that an issuer would perform according to the plain terms of its advertisement. The bonus offers were material because they were central characteristics of the credit card advertisements. In fact, the issuers misled consumers because they failed to provide the advertised bonuses to customers who satisfied these requirements. The issuers failed to ensure that their employees followed procedures for making correct system entries when enrolling existing consumers.

Examiners also found that the credit card issuers engaged in deceptive acts or practices by advertising to other consumers that they would receive certain bonuses if they opened new credit card accounts in response to the advertisements and met certain spending requirements. The issuers, however, failed to disclose or adequately disclose that consumers must apply online for the new credit card to receive the bonus. In fact, if the consumers otherwise satisfied the requirements but applied through a different channel, the credit card issuers failed to provide the bonus, as promised. The advertising’s overall net impression misled or was likely to mislead consumers who could reasonably conclude that they needed only to satisfy the specified spending requirements, as the application channel was not disclosed or was inadequately disclosed. The representation regarding the bonus offer terms was material because it related to a core feature of the product. Thus, the credit card issuers’ failure to adequately disclose the online limitation in light of the representation constituted a deceptive act or practice.

Institutions should review advertisements to ensure deceptive acts or practices are not present.