More specifically, the act  requires creditors to print on the billing statements of revolving credit  products (of which credit cards are a form) a generic disclosure that  “making only the minimum payment will increase the interest you pay and  the time it takes to repay your balance.” In addition to the generic  disclosure, the law requires creditors to choose from two options for  providing additional information to cardholders: (1) providing a toll-free  telephone number that cardholders could use to obtain the actual number  of months that it would take to repay their outstanding balance if they  made only minimum payments or (2) providing an example of the length of  time required to pay off a sample balance at an interest rate of 17 percent  and a toll-free telephone number cardholders could call to get an estimate  of the time required to repay their balances. For example, regulation could  establish parameters for the calculations, such as how to treat accounts  with multiple interest rates. Estimates of Total Implementation Cost Varied Widely

Perhaps reflecting the uncertainties and range of assumptions noted above,  the estimates that we obtained of total first-year costs ranged from $9  million to $57 million for large issuers. Revolvers generally preferred to receive a customized disclosure about the  consequences of making minimum payments. Many of the cardholders  who preferred the customized disclosure or thought that it was more useful  than a generic disclosure said they did so because the information provided  would be specific to their account and change each month, based on their  transactions. Rather  than providing customized disclosures, some suggested that government  agencies, issuers, financial educators, and consumer groups expand  general financial education efforts on the consequences of making  minimum payments. A second alternative that issuers and others identified would be to place  the disclosure in a location other than the first page of the billing  statement. In addition, the consumers we interviewed generally  greatly preferred receiving minimum payment disclosures in their billing  statements. This alternative could reduce both postage  and paper costs for issuers because additional pages to print the disclosure  would be needed less frequently. Observations

Our work indicates that credit card issuers and processors have the  necessary data and systems capabilities to provide customized minimum  payment disclosures—that is, to include customized information in billing  statements that would show the length of time required to pay off each  cardholder’s actual balance and the additional interest that would be  incurred if only the minimum payment is made each month, as well as the  monthly payment required to pay off an outstanding balance in a given time  period. While providing cardholders with additional disclosures about the  consequences of making only minimum payments on their credit cards  would appear to provide them with useful information, such disclosures  would raise issuer costs and whether the impact on consumer behavior  would be large or small is not known. Objectives, Scope, and Methodology

Our objectives were to (1) determine the feasibility and cost of requiring  credit card issuers (issuers) to provide cardholders with customized  minimum payment information, (2) assess the usefulness of providing  customized information to cardholders, and (3) identify options for  providing cardholders with customized or other information about the  financial consequences of making minimum payments.
Why GAO Did This Study

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 requires that credit card issuers (issuers) include in all cardholder billing statements a generic warning, or "disclosure," about the potential financial consequences of consistently making only the minimum payment due on a credit card. However, some have urged that consumers should instead receive "customized" disclosures in their billing statements that use cardholders' actual balances and the applicable interest rates on their accounts to show the consequences of making only minimum payments, such as estimates of the time required to repay balances and the total interest amount resulting from continual minimum payments. In response to a congressional request, this report assesses the (1) feasibility and cost of requiring issuers to provide cardholders with customized minimum payment information, (2) usefulness of providing customized information to cardholders, and (3) options for providing cardholders with customized or other information about the financial consequences of making minimum payments.

What GAO Found

Representatives of credit card issuers and processors that handle billing and other operations for issuers said they have the technological capability to provide cardholders with customized minimum payment information. The calculations that would be included in such disclosures require various assumptions, including that no more charges are made on the account, and decisions on how to address other issues, such as balances subject to multiple interest rates, that would affect the estimates' precision. Issuers and processors estimated that the most significant costs of providing customized disclosures would be for additional postage, computer programming, and customer service. Although uncertain about exactly what calculations would be required, the estimates that issuers provided for total implementation costs ranged from $9 million to $57 million. In GAO's interviews with 112 cardholders, most who typically carry credit card balances (revolvers) found customized disclosures very useful and would prefer to receive them in their billing statements. These consumers liked that customized disclosures would be specific to their accounts, would change based on their transactions, and would provide more information than generic disclosures. However, cardholders who pay their balances in full each month were generally satisfied with receiving generic disclosures or none at all. Consumer groups, financial educators, and others indicated that customized disclosures could reduce cardholders' tendency to make minimum payments; conversely, issuers foresaw limited impact because few cardholders make minimum payments and not all can afford to pay more. Alternatives for providing customized disclosures include providing them only to revolvers, providing them less frequently, or in a location other than the first page of billing statements. While such alternatives could lower issuer costs, they could also decrease the customized disclosures' potential impact.