Consumer bureau fires warning shot at credit card companies

The Consumer Financial Protection Bureau (CFPB) is cracking down on credit card companies that it says offer deceptive interest rate promotions.

Concerned that credit card issuers may not be clearly disclosing the terms of their promotional offers, the CFPB on Wednesday warned companies against "luring in consumers" with low interest rate offers that mysteriously disappear.

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“Credit card offers that lure in consumers and then hit them with surprise charges are against the law,” CFPB Director Richard Cordray said in a statement. “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,” he added.

The CFPB is particularly concerned about interest-free promotions for balance transfers, where a consumer moves his or her debt from one credit card to another.

"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 CFPB warned.

"The only way for these consumers to avoid interest charges on new purchases made with the credit card is to pay off their whole statement balance, including the promotional balance and the new purchases, by their monthly billing due date," the agency said.

The CFPB warned credit card companies that fail to adequately explain these terms may be engaging in deceptive and abusive marketing practices, which could draw stiff penalties from the agency.