Tougher Regulation on Credit Card Protection Plans Applauded by ClearOne Advantage

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Executives at ClearOne Advantage are encouraged by efforts being made by federal regulators in creating stricter guidelines for payment protection plans and urge consumers to make educated decisions.

Executives at ClearOne Advantage, a Maryland-based debt resolution company, are encouraged by recent efforts being made by federal regulators in creating stricter guidelines for credit card payment protection plans and urge consumers to make educated decisions before signing up.

“These plans are being marketed to credit card customers as a safety net for unforeseen misfortunes, but all may not be what it seems”, says Tomas Gordon, CEO of ClearOne Advantage.

Protection plans, offered by credit card issuers such as Discover, Bank of America, Citibank and others as a way to put monthly payments on hold in times of illness or financial distress, have become big business for credit card companies. Credit lenders collected $2.4 billion in fees from the 24 million credit card accounts enrolled in payment protection plans in 2009, according to a report released by the Government Accountability Office on the nine largest credit lenders. From those collected fees, lenders posted $1.3 billion in pretax profits, with an additional quarter of the fees going to marketing costs and administering the plans. Only 21% of fees, roughly $518 million annually, are spent on paying out actual benefits to customers, the report found.

Some have noted that the increase in marketing efforts of payment plans by their issuers has come as a way to circumvent the regulations that were introduced into the industry by the 2009 passage of the federal Credit CARD Act, which aims to secure transparency and fairness to consumer credit practices, have made credit issuers more reliant on the revenue generated from their payment protection plans.

Furthermore, opponents argue that the plans are often confusing and offer no real value to consumers who need them. For example, plans are often marketed without disclosing much of the initial fine print and banks return only 21 cents of every dollar in payment-protection premiums to consumers in the form of suspended or cancelled debt, a recent report by American Banker found.

“The belief among consumers that these plans act as a type of emergency insurance is misleading and regulation of this auxiliary product is necessary”, Gordon said.

Calls for deeper regulation have not gone unanswered. The January 26 regulatory filing by Discover Financial Services has prompted both the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB) to further investigate the company’s business practices, including credit protection plans. Industry watchdogs are hopeful the probe will lead to heightened transparency and fairness for one of the credit industry’s most profitable commodities.

“There are certainly other means that consumers can achieve a financial peace of mind in times of crisis,” said Gordon. “At ClearOne Advantage, we aim to guide individuals struggling with debt in ways that are both beneficial and cost-effective.”

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ClearOne Advantage is a full-service debt settlement company providing settlements of credit cards and other unsecured debts. Our executive leadership team is comprised of financial industry professionals with expertise in many of the industries that provide consumer lending services, making ClearOne Advantage the obvious choice when looking to settle debt. To learn more about the products and services that make ClearOne Advantage an easy choice in debt settlement call 1-888-785-5376 or visit


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Tomas Gordon
ClearOne Advantage
(443) 996-1889
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