Consumer News, Deceptive Advertising

CFPB Warns Consumers of Credit Card Companies’ Deceptive Marketing Tactics

Posted: September 3, 2014 at 3:24 pm   /   by   /   comments (0)

The Consumer Financial Protection Bureau issued a statement that has put all credit card companies “on warning” for not disclosing hidden fees in their marketing initiatives. Educating consumers of all fees associated with balance transfers and lower interest rates is becoming a much needed, top priority.

WASHINGTON, D.C. –(ENEWSPF)—September 3, 2014. Today, the Consumer Financial Protection Bureau (CFPB) warned credit card companies against deceptively marketing interest-rate promotions. The Bureau is concerned that some companies are luring in consumers with offers of zero or lower interest for a specific purchase or balances transferred from another credit card, and then hitting them with surprise interest charges. In the bulletin released today, the Bureau puts credit card issuers on notice about clearly disclosing the costs and risks of these promotional offers so consumers understand what they are signing up for.

“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.”

The bulletin is available at: http://files.consumerfinance.gov/f/201409_cfpb_bulletin_marketing-credit-card-promotional-apr-offers.pdf

The CFPB bulletin highlights concerns around the marketing of credit card interest-rate offers such as balance transfers, deferred-interest offers, and convenience checks. Under these promotions, consumers are often charged a fee to transfer a balance or make a purchase with their credit card in order to receive a promotional interest rate on that amount for a set period of time. While consumers pay no interest or a low interest rate for balances subject to the promotion, any additional purchases consumers make with the credit card may incur interest charges right away.

The Bureau believes some companies’ marketing materials do not clearly disclose that consumers must pay off the promotional balance by their due date to avoid racking up unexpected interest charges on routine purchases for which they were not charged interest previously. For some consumers, these surprise charges can make the cost of transferring a balance more expensive than revolving the same balance on their existing card.

These marketing tactics specifically impact consumers who enjoy an interest-free “grace period” on their credit card purchases. Consumers who pay off their total credit card balance each month receive a grace period during which they do not have to pay interest on purchases. When consumers carry their promotional credit card balance past their payment due date, they lose their grace period and are charged interest on all new purchases. The only way for these consumers to avoid interest charges on new purchases made with this credit card is to pay off their whole statement balance, including the promotional balance and the new purchases, by their monthly billing due date.

Read the full story from enewspf.com >

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