(Adds American Bankers Association comment)
By Sarah N. Lynch
WASHINGTON, Sept 3 The top U.S. 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
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 U.S. 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
"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
"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
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.
A copy of the bulletin warning credit card companies is
available here: here
(Additional reporting by Emily Stephenson in Washington and
Peter Rudegeair in New York; Editing by Jonathan Oatis and Dan