CFPB Urges Card Issuers to Seek Alternatives to Deferred Interest Promotions

CFPB Director Richard Cordray recently sent letters to top retail credit card companies expressing concerns about deferred interest products, which allow consumers to pay for a purchase over time interest-free, provided the balance is repaid within the promotional period.

Expanding upon the contents of the letter, Cordray in remarks today noted that the bureau is encouraging companies to consider offering zero-percent-interest promotions in the place of deferred interest promotions.

ABA has consistently worked to provide CFPB with data on the value and use of deferred interest products in the marketplace, noting that they provide an alternative to riskier products.  In its comment letter to CFPB regarding the 2017 CARD Act Report, the association cited a 2015 review by the bureau that found that even among subprime consumers, the majority repay within the deferred interest period and benefit from the free loan.

Furthermore, consumers that do not repay within their deferred interest period pay the same amount of interest as those using credit cards and paying interest from the start of the loan. “In other words, they were no worse off than if they had not had the interest-free option,” ABA added.

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