Last week, the Consumer Financial Protection Bureau (CFPB) announced its latest project in the credit card arena: Simplifying credit card agreements.

The CFPB, the U.S. government's bureau designed to educated consumers about financial practices, supervise financial institutions and enforce Federal consumer financial laws, has developed a project called Know Before You Owe. This initiative aims to simplify credit card agreements so that consumers can more easily understand the prices, risks and terms involved with credit cards.

"Credit cards can be complicated, with many moving parts that impact the cost to consumers," says Raj Date, the special advisor to the Secretary of Treasury on the CFPB in a press release. "When a consumer has to read through pages of legal fine print in their credit card agreement to figure out how their card works -- it's easy to get confused. With a short, simple, easy-to-understand credit card agreement, consumers can clearly see the terms of the deal and make the decisions that are right for them.

To that end, the CFPB has developed a prototype credit card agreement that it hopes is shorter, more clearly written and is more upfront in its explanations of features. This agreement is confined to two pages, which, when compared to many existing card agreements, is much shorter. In terms of word count, the prototype, which clocks in around 1,100 words, is a fraction of the average 5,000 words that's in a current credit card agreement.

The prototype is divided into three sections:

• Costs. This section discusses the costs involved with the different types of charges, including purchases, cash advances and balance transfers. It also addresses what a credit card user has to pay and when, how late fees are assessed, how interest is calculated and any special promotions that might be currently occurring with the card.

• Changes. In accordance with the law, credit card issuers are allowed to change some of the interest rates and other terms of the agreement. The table in this section clearly lays out the type of change, what may trigger the change and how much advance notice the issuer must give the cardholder.

• Additional Information. This section spells out rights of both the cardholder and issuer, how billing and other disputes get handled, any other terms of agreement and privacy information.

The CFPB hopes that this prototype will highlight the prices, risks and features of a particular credit card so that consumers can better understand them, rather than having to pour through fine print to understand basic terms.

Along with using plain language, the prototype also attempts to remove some of the legalese in the card agreement by standardizing definitions for legal terms like "card" and "balance transfer" that these agreements must contractually use but that can be vague and difficult for consumers to understand. These standardized terms, which will be located online or available in printed form from card issuers, were determined by standard industry usage and practices.

In its press release announcement of this project, the CFPB is calling this prototype a "thought starter." It's currently testing this prototype with the Pentagon Federal Credit Union, an institution with over one million members, including about 350,000 cardholders. The general public can also view and comment on this prototype at the CFPB website.

To aid in comparison, the CFPB has built a database of existing credit card agreements, based on copies of these agreements that the government requires issuers to provide to the Federal Reserve in compliance with the CARD Act. The CFPB took responsibility for maintaining this database through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The database includes standard cards such as Visa, MasterCard, American Express, and Diners Club, as well as store cards and gas station cards.