The Consumer Financial Protection Bureau has issued a warning to credit card companies against deceptively marketing promotional interest rates.
The bureau expressed concerns over the marketing of credit card interest-rate offers – such as balance transfers, deferred-interest offers and convenience checks – which offer a promotional annual percentage rate.
“Certain solicitations for these types of offers risk being deceptive if the marketing materials do not clearly and prominently convey that a consumer who accepts such an offer…will lose his grace period on new purchases if he does not pay the entire statement balance” by the payment due date, the bulletin said. Credit card issuers further may be engaging in abusive conduct if they fail to adequately alert consumers to this fact.
Absence of clear explanation in a prominent location may cause even a “reasonable consumer” to misapprehend the precise nature of the introductory rate offer, and “one or more card issuers” have created and failed to cure such false impressions, the bulletin said.
Previously, the bureau had raised concerns in an October report that many consumers lacked basic understanding of grace periods and how they work. The bureau also questioned the adequacy of current consumer disclosures.
“Credit card offers that lure in consumers and then hit them with surprise charges are against the law,” said CFPB Director Richard Cordray. “Before they sign up, consumers need to understand the true cost of these promotions. 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.”