The proposal implements a requirement of the Bankruptcy Act that card issuers warn their customers on the periodic statement about the higher cost of making only minimum payments, give a hypothetical example of the time to repay a balance with minimum payments, and refer the customer to a toll-free telephone number for an estimate of the time to repay the current balance if paying only the minimum.1 In testing conducted by the Board and in separate testing conducted by the U.S. Government Accountability Office (GAO), participants who typically carry credit card balances found an estimated repayment period based on terms that apply to their own account more useful than a hypothetical example.
Accordingly, the proposal gives card issuers incentives to provide a more precise estimate of the time to repay and to place this estimate on the periodic statement. The incentives include exemptions from the requirements to maintain a toll-free telephone number and disclose the warning and hypothetical example.