I'm sure you're like me and have been receiving a ton of credit notifications through the mail in the recent month, so I decided to review the new regulations governing the credit card industry. I stepped into the shoes of our customers, which include some of the largest credit card issuers in the country. I found that since many of the regulations involve changes in how credit card companies communicate with consumers, these companies must figure out how to accommodate the regulatory requirements as part of their billing cycle.
Based on my understanding, credit card issuers will end up sending much more written correspondence to their customers throughout this and coming years. This correspondence will either take the form of additional pages or inserts within a billing statement or may crowd out current marketing messages to make room for compliance information.
Credit card issuers have been some of the most active marketers of paperless billing, and have had some relative success in convincing consumers to ditch paper. However, many of the new regulations require issuers to notify their customers in writing about changes, which may result in a new wave of paper communications to electronic billing customers. How does this align with cutting cost, going green and increasing efficiencies?
Under the first phase of the new law that recently took effect, creditors are required to provide written notice of an increase in the annual percentage rate (APR) on your account no later than 45 days before the effective date of the proposed change. Previously, only 15 days notice was required. Additionally, creditors must also provide written notice of any significant change in the terms of your agreement with the creditor no later than 45 days before the effective date of the change. When creditors send notice of an increase in the APR or any other significant change in the terms, they must also provide clear, written notice to the consumer of their right to cancel the account before the interest rate increase or the change in the terms of the account take effect.
The Credit CARD Act, which took effect in February 2010, also enhances consumer disclosure requirements. For instance, the Act requires creditors to provide individual consumer information, disclosing how long it would take the consumer to pay off the balance on their account if only minimum monthly payments were made. It will also require creditors to disclose the total amount of interest the consumer would be required to pay if only minimum monthly payments were made. These disclosures may take up valuable space in envelopes and on statements — space usually reserved for marketing.
These changes may result in many new notification mailings to paperless customers and an increase in the number of pages in paper bills to customers, possibly resulting in big increases in paper, ink and postage required. That also means new processes for customer notification and, more importantly, incorporating new feedback loops into the billing cycle. While these notifications are about informing the customer, they also spell out new options with which the customer can respond.
Some of these new changes may seem like one step forward, two steps back for paperless customer communications. However, I prefer to view it as another reason to review your processes and ensure you are utilizing a flexible billing and message process that incorporates dynamic messaging, paper suppression and the ability to integrate short feedback loops. If you don't have the sting of rewriting your entire process with every new billing change or requirement, the costs of sending additional notifications or any future requirements, regulatory or otherwise, can be a little easier to stomach.
TRACY DALTON [tracy.dalton@regulusgroup.com], is manager of product development and management for Regulus Group, a transaction processing solution outsourcer provider. Ms. Dalton is responsible for new products and services that meet the strategic direction of Regulus and their clients.
