Compliance Blog

Mar 29, 2011
Categories: Consumer Lending

GAO Report - Credit Protection; Revised Reg Z & M Thresholds

Posted by Sarah Loats

Remember the Federal Reserve's proposed disclosures for credit protection products? The Fed may have tabled that proposal, but it looks like the CFPB will be reviewing these products, so don't expect the issue to disappear. As directed by the Credit CARD Act, the GAO conducted a study on debt protection and credit insurance products. In short, the GAO found that these products can offer consumers certain advantages, and that regulators have reported very few consumer complaints related to these products; however, the report also noted that fees associated with these products can be substantial and that consumers can have difficulty assessing and evaluating these products. In conclusion, the GAO gave two recommendations to the CFPB:

1. that it factor into its oversight and regulation of credit card debt protection products, including its rulemaking and examination processes, a consideration of the financial benefits and costs to consumers; and

2. that it incorporate in its consumer financial education efforts ways to improve consumers’ understanding of credit card debt protection products and their ability to assess whether or not the products represent a good choice for them.

If you read the full report you'll note that the CFPB's response to GAO is included in Appendix II. Of note, the CFPB states:

The CFPB agrees with the report's conclusion that it would be "consistent with the bureau's mission" to "consider[] consumer awareness and understanding of the costs... and benefits" of credit protection products in evaluating the existing disclosures rules with respect to these products. The CFPB intends, as the report recommends, to "factor into its oversight and regulation" of these products consideration of this sort.


I don't know how high this is on the CFPB's priority list, but I would expect to see the CFPB address these products sometime in the future.

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The Federal Reserve has finalized rules implementing the new thresholds for Regulations M and Z. Effective July 21, 2011, the threshold for these two rules will increase to $50,000. And, beginning December 31, 2011 the threshold will be adjusted annually for inflation.