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Bad Apples

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The Office of the Comptroller of the Currency has issued an advisory to national banks citing concerns over unacceptable credit card practices by some issuers. The regulator specifically listed as problem areas, inadequate disclosure of penalty pricing policies, promotion of unrealistic “up to” credit limits, and, insufficient disclosure of the limitations of promotional rates. The OCC cautioned issuers that these may constitute unfair or deceptive acts, potentially exposing a national bank to compliance issues. The OCC said national banks should disclose fully and prominently in promotional materials the circumstances under which the credit card agreement permits the bank to increase the consumer’s cost, or that the issuer can make the changes unilaterally. The OCC also said banks should not advertise maximum credit limits to sub-prime consumers when most applicants receive a significantly lower default credit line. The OCC also criticized sub-prime issuers who advertise the possible uses of the card when the initial available credit line is likely to be so limited that the advertised possible uses are substantially illusory. Additionally, the OCC said that banks need to disclose fully and prominently any material limitations on the applicability of promotional rates, and not make representations that create the impression that material limitations regarding the applicability of the promotional rate do not exist. The OCC also suggested that some issuers have not properly disclosed fees connected to promotional pricing.

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