CFPB Slams Promotional Fees

The Consumer Financial Protection Bureau (CFPB) warned credit card companies not to mask hidden charges associated with low promotional interest rates, according to American Banker.

In a bulletin issued Wednesday (Sept. 3), the agency specifically targeted issuers that offer low or zero interest rate promotions without clearly disclosing that interest rates could be hiked or that sudden charges could result from adding new purchases before the total balance is paid off.

In October, the CFPB estimated that consumers made millions of promotional balance transfers in 2013, and about 43 percent of borrowers with subprime credit scores were eventually hit with a retroactive interest charge.

Examinations of “large banks and credit card issuers indicate that some companies may be failing to adequately explain the terms of certain interest-rate promotional offers, leaving consumers confused about why they are incurring new interest charges on their purchases,” the agency said in the bulletin.

The bulletin added that issuers should use “adequate measures to prevent violation of federal consumer financial laws, including the Dodd-Frank Act’s prohibitions on unfair, deceptive, or abusive acts or practices” and to implement “internal controls sufficient to ensure that they market promotional APR offers in a manner that limits the risk of statutory or regulatory violations and related consumer harm.”