The CFPB has launched a review of credit card deals (like store-branded or the like) that offer card holders 0% interest during an introductory period, but then reset to a much higher rate if the balance is not paid in full by a specific date.
One of the outstanding areas of concern cited by the CFPB report is deferred interest credit cards, which some consumers use to finance purchases without interest for a period of time. The report notes, if a balance on this type of card is not paid in full by a certain date, the accumulated interest may be assessed retroactively.
Christina Tetreault, staff attorney for Consumers Union, said, “We have serious concerns about deferred interest credit cards.
Some people turn to these cards to cover the cost of big-ticket items, but the terms are incredibly complicated, and you can wind up getting hit with huge,
surprise penalties. We’re pleased to see the CFPB call out these products, and we’re glad that the bureau is going to take a hard look at the risks and benefits.”
The report points out that, before the law took effect, credit card companies could charge an overlimit fee for transactions that pushed customers over their credit limit. Since the law now requires that consumers opt in to fees before they are allowed to exceed their credit limit, the CFPB found overlimit fees have essentially been eliminated.
Banks said, “The fact that the law has effectively gotten rid of overlimit fees in the credit-card market is a big win for consumers. We’d like to see the same opt-in reforms applied to all financial transactions, including checks and automatic bill payments.”
The full CFPB report is available here, and a fact sheet is online here.
Source: AmericanBanker and ConsumersUnion