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Researchers : Credit Cards: Consumer Costs for Debt Protection Products Can Be Substantial Relative to Benefits but Are Not a Focus of Regulatory Oversight
Complete Description:In response to a mandate in the Credit Card Accountability Responsibility and Disclosure Act of 2009, this report reviews dept protection product market share and characteristics, federal and state oversight, and advantages and disadvantages to consumers. For this report, GAO analyzed data it had requested on these products from three major credit insurers and the nine largest credit card issuers. These nine issuers represented 85 percent of the credit card market. GAO also reviewed the products’ terms and conditions, related marketing materials, and applicable federal and state regulations. GAO found that in 2009, consumers paid about $2.4 billion on 24 million accounts for debt protection products, according to data from the nine largest credit card issuers. Debt protection products have largely displaced credit insurance in the credit card market, although the two products are similar from a consumer’s perspective. Debt protection products are banking products that are largely federally regulated, while credit insurance is an insurance product regulated by the states. Unlike state oversight of credit insurance, federal banking oversight of debt protection products does not directly address the relative financial benefits and costs of the products to consumers. While these products offer advantages, fees for these products can be substantial, with the annual cost often exceeding 10 percent of the cardholder’s average monthly balance. Federal agencies offer few educational resources to aid consumers in assessing them..
Date Published:Tuesday, March 1, 2011
Funding Agency: US General Accountability Office
Type: Report;
Source: Administrative data;
Language: English
Audience: Researcher