Compliance Center: CFPB Issues Bulletin Regarding Marketing of Credit Card Promotional APR Offers
September 9, 2014
September 9, 2014
The Consumer Financial Protection Bureau (CFPB) recently released CFPB Bulletin 2014-2 regarding the marketing of credit card promotional annual percentage rate (APR) offers. The CFPB stated it has concerns that some companies are luring consumers with offers of zero or lower interest rates for a specific purchase of balances transferred from another credit card, and then hitting the consumer with surprise interest charges. The Bulletin is intended to put credit card issuers on notice about clearly disclosing the costs and risks of these promotional offers or potentially risk being seen as having a deceptive practice.
The Bulletin discusses the CFPB’s concerns of deceptive advertising practices that might not include any information about the loss of the grace period for new purchases not tied to the promotional offer, and even potential abusive practices.
Regulation Z does not require marketing materials to include additional disclosures alerting members to the effect of accepting a promotional offer on the loss of the grace period on purchases. But, the CFPB is concerned that the marketing materials accompanying some offers may risk being deceptive or abusive in violation of the Dodd-Frank Act, even if Regulation Z is not violated.
The CFPB expects card issuers to take steps to ensure that:
- All solicitations, applications, account-opening materials, and convenience checks comply with the requirements in Regulation Z;
- All marketing materials clearly, prominently, and accurately describe the material costs, conditions, and limitations associated with the offers; and
- All marketing materials clearly, prominently, and accurately describe the effect of promotional APR offers on the grace period for new purchases.
Compliance Question of the Week
Does federal law require a credit union to provide an overdraft notice whenever an NSF item is presented?
No. Truth in Savings does not require that a credit union give a member an overdraft notice when an NSF item occurs. However, credit unions are now required to include notice on the member’s statement advising of any overdraft fees or returned item fees. Credit unions do generally send a notice as a matter of industry practice and member courtesy. This notice is also helpful as a loss control measure since it raises a red flag for errors or unauthorized items.
And while there is not a regulatory requirement to send the notice, the Joint Guidance on Overdraft Protection Programs suggests a best practice to promptly notify the member each time the overdraft protection item is used.
National Credit Union Administration (NCUA)
The NCUA issued a press release about the loan growth of credit unions during the second quarter of 2014.
Consumer Financial Protection Bureau (CFPB)
The CFPB has issued a notice and request for comment on a new information collection titled “Financial Coaching Program for Veterans and Low-income Consumers.”
The CFPB announced that its Consumer Advisory Board Meeting will be held in Washington, DC on Thursday, September 11, 2014.
The CFPB posted an article on its blog warning consumers of the dangers of zero percent interest credit cards.
The CFPB also issued a bulletin directed to credit card issuers warning of the risk of engaging in deceptive or abusive acts and practices when marketing credit cards with promotional APRs.
The CFPB updated the small entity compliance guides for the new TILA/RESPA Integrated Disclosure Rule and provided a disclosure timeline to help show the different timing requirements under the rule.
Federal Reserve Board (FRB)
The FRB has released a new issue of FedFocus.
The FRB released an update to the Beige Book as of September 3, 2014.
Federal Housing Finance Agency (FHFA)
The FHFA issued a proposal that would revise eligibility requirements for membership to the Federal Home Loan Bank. Comments are due by November 1, 2014.
Office of Foreign Assets Control (OFAC)
OFAC has updated the SDN list as of August 29, 2014. The last update prior to this was August 27, 2014.
Questions? Contact the Compliance Hotline: 1.800.546.4465, email@example.com.