Report: Credit card fee disclosures have become overly complex

A study released on Oct. 11, 2006, by the Government Accountability Office found that credit-card fee disclosures frequently have serious weaknesses and are often too complex for consumers to understand.

The detailed study by the Government Accountability Office, the investigative arm of Congress, evaluated fees, interest rates and disclosures for the 28 most popular cards offered by the six biggest credit card issuers: Bank of America, Capital OneChase, Citibank, Discover and MBNA. 

"We found that these disclosures have serious weaknesses that likely reduced consumers' ability to understand the costs of using credit cards," the report explained.  It said that disclosures are written in language that is hard to understand, were poorly organized and use small typefaces. 

With lack of clarity regarding important rates cited as a common problem, the study recommended the Federal Reserve Board revise regulations on credit card disclosures to require that they more clearly acknowledge penalty fees and rates as well as what causes them.

Additionally, the report found that late payments fees averaged $34 in 2005, a spike of 115 percent from $13 in 1995.

Still, the report highlighted the fact that many consumers have experienced a decline in their interest rates over the past decade, commenting, "Many cardholders now appear to have cards with interest rates less than the 20 percent rate that most cards charged prior to 1990."

The American Bankers Association, while not disputing that credit-card fee disclosures are tough for many consumers to understand, responded that credit card issuers are required by federal regulations to provide disclosures in a certain way, from which they cannot stray far.  

Also, the study found that users of almost half of all active credit card accounts paid little or no interest in 2005 because they often paid their balances in full.

And, while penalty interest and fees have likely increased as part of issuer revenues, the report stated, the largest credit card issuers have not enjoyed greatly higher profits over the last 20 years.

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Updated: 03-26-2019