CFPB Targets 0% Interest Card Promotions
The CFPB has warned credit card companies to clearly disclosure the terms of their low- or no-interest rate promotional offers.
“CFPB supervisory experience has observed that some card issuers do not adequately convey in their marketing materials that a consumer who accepts such a promotional offer will lose his grace period on new purchases if he does not pay the entire statement balance, including the total amount subject to the promotional APR, by the payment due date,” said a CFPB bulletin.
“Affected consumers would be those who maintain a grace period on purchases by paying their full statement balance by the payment due date each month, accept the promotional offer and then continue to make purchases using the credit card,” the bulletin also said.
According to the CFPB, many consumers are not aware that any new purchase made on a credit card account already carrying a promotional balance is usually subject to interest charges.
The CFPB noted that the Dodd-Frank Act, which was signed into law by President Obama in 2010, prohibits credit card companies from engaging in practices that mislead consumers.
“Credit card offers that lure in consumers and then hit them with surprise charges are against the law. Before they sign up, consumers need to understand the true cost of these promotions,” CFPB Director Richard Cordray said Wednesday. “Today, we are putting credit card companies on notice that we expect them to clearly disclose how these promotional offers apply to consumers so that they can make informed choices about their credit card use.”
The CFPB said it expects credit card issuers to prevent the violation of federal consumer financial laws through effective compliance management systems.