WASHINGTON: The top US consumer protection regulator issued a stern warning to credit card companies on Wednesday, saying it believes some of them are deceiving customers about hidden fees associated with certain promotional offers.
Consumer Financial Protection Bureau Director Richard Cordray stopped short of saying whether his agency may pursue any enforcement actions against credit card companies.
But he said that hitting customers with surprise fees is illegal and urged companies to make sure they clearly disclose how their promotional offers work.
"We are putting credit card companies on notice," he said in a press release. The marketing materials at the heart of the CFPB's warning center around interest-rate offers, such as balance transfers or deferred interest deals.
Typically, a consumer is charged a fee to transfer a balance or required to make a purchase in order to get a lower interest rate. But consumers may not always be told after they transfer balances to the new card that additional purchases may incur interest right away.
Recent US rules have limited the types of fees banks can charge credit card customers, so they have looked for new ways to boost income. Some card issuers have ramped up balance transfer offers and other tactics to bring in more card customers.
"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," the CFPB said in the press release.
"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." The bureau did not name any credit card company.
Card issuers that offer balance transfers include Capital One, JPMorgan Chase, American Express and Citigroup, according to CardHub.com, a card comparison website owned by Virginia-based Evolution Finance. Nessa Feddis of the American Bankers Association said providing disclosures is an industry priority.
"Federal regulations require and banks ensure that consumers receive four highlighted notices indicating they will lose the grace period on new purchases if they don't pay their balance in full," Feddis said in a statement.
The CFPB was created by the 2010 Dodd-Frank Wall Street reform law following the global financial crisis. Its mission is to protect consumers from abuses or deceptive practices surrounding certain financial products such as credit cards and payday loans.
The CFPB on Wednesday also released a list of tips for consumers to help them understand how grace periods work and how to evaluate credit card promotional offers.
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