Who could possibly object to zero or low promotional interest rates offered for convenience checks, balance transfers or new purchases?
The Consumer Financial Protection Board (CFPB), that’s who.
In a new Bulletin based on its findings from examinations of large banks and card issuers, the CFPB warns that some credit card issuers may be engaging in deceptive or abusive acts or practices when promoting or offering promotional APRs, in violation of Section 1031 of the Dodd-Frank Consumer Financial Protection Act. According to the CFPB, some card issuers are failing to sufficiently warn consumers that their continued use of credit cards for purchases during a promotional period may forfeit the grace period on new purchases if the consumers do not pay the entire statement balance (including the amount subject to the promotional APR) by the payment due date.
The Bulletin makes clear that card issuers’ legal responsibilities go well beyond compliance with Regulation Z in marketing and offering credit cards with a promotional APR feature. In particular, the CFPB now mandates, among other things, that card issuers implement measures (including in their compliance programs) to ensure that all marketing materials “clearly, prominently, and accurately” describe the material costs, conditions and limitations associated with promotional APR offers and the effect of promotional APR offers on the grace period for new purchases.
Concerns about grace periods–consumer misunderstandings about how they work and questions about whether Regulation Z-compliant disclosures adequately disclose risks associated with grace periods and promotional APRs–were previously raised by the CFPB in a report to Congress.
Based on the CFPB’s heightened level of focus, prudent card issuers should take a fresh look at their new and existing promotional APR programs to ensure that all marketing materials and disclosures meet the CFPB’s expectations.
This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney.
This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary.
The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites.
In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.