OCC Ruling Relieves Credit Card Marketers
Marketers worried that the office, which has the power to regulate credit card marketing, would have required marketers to receive written signatures from consumers before enacting such agreements, or would have equated the agreements with a form of insurance. The ruling, released Sept. 17, removes those fears.
Congress granted the OCC the authority to regulate credit card marketers when it passed the Gramm-Leach-Bliley Act in 1999. In 2000, the office published a notice of proposed rulemaking stating that it was considering changes regarding debt suspension and cancellation agreements.
The agreements are marketed by banks and credit card issuers to offer consumers protection in case they fall behind on credit card payments due to loss of employment or other emergencies. Debt suspension offers consumers temporary relief from making credit card payments, while cancellation agreements offer to remove the consumer's obligation to pay the loan.
Had the OCC required that consumers sign a written disclosure form before closing a deal, telemarketing of the agreements would have become more complicated. Instead, the office provided an exemption allowing telemarketers to obtain digitally recorded agreements over the phone instead of written signatures.
In addition, the OCC declined to consider the agreements a type of insurance product. Doing so would have taken the agreements out of the hands of federal regulators and into the jurisdiction of the states, opening the possibility that they would be subject to 50 different state laws.
The OCC also ruled that marketers could provide consumers with short-form disclosures at the time of closing an agreement provided that they mail a long-form disclosure brochure afterward. The new rules take effect in June 2003.
"It's something the industry can live with," said Kenneth Kraetzer, vice president of CBSI, Harrison, NY.
The decision was greatly anticipated by banks, telemarketers and trade associations, which led efforts to communicate with the OCC about the issue, Kraetzer said. The office received 51 comment letters in response to its proposed rulemaking.
The ruling was less a victory than "a sigh of relief" for marketers, said Jim Conway, senior vice president for the Direct Marketing Association. At one point, the OCC had even raised the idea of requiring marketers to get not only a consumer's signature but a notary's stamp before making debt suspension and cancellation agreements effective.
"We're pleased they reviewed it and did so thoroughly," Conway said. "Now we can rely on this."