Deferred-Interest Loans Face New Scrutiny

October 23, 2013
American Banker 
credit card news

The Consumer Financial Protection Bureau (CFPB) is raising concerns about deferred-interest credit card loans offered by retailers. These accounts often waive interest on all purchases during an introductory period but then hit borrowers with stiff costs later.

"The trap is that they sock consumers with huge retroactive interest charges -- going back to the date of the purchase -- if the consumers are short by even a few dollars in paying off the entire purchase by the end of the so-called 'interest-free' period," explained a press release from the National Consumer Law Center.

In a report released earlier this month, the CFPB revisited that concern but also acknowledged some potential consumer benefits from deferred-interest loans. "The Bureau intends to continue to study these issues and assess whether additional action is appropriate to promote a more fair and transparent market," the report concluded.

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