The CFPB Alerts Credit Card Issuers That Marketing of Credit Card Promotional APR Offers May Violate Federal Law


The Consumer Financial Protection Bureau (“CFPB”) recently issued a bulletin alerting credit card companies that they may be at risk of breaking the law as a result of the way they market promotional rates. Specifically, credit card issuers may be at risk of engaging in deceptive and/or abusive acts and practices  in connection with solicitations that offer a promotional annual percentage rate (“APR”) on a particular transaction over a defined period of time. These transactions include, but are not limited to, convenience checks, deferred interest/promotional interest rate purchases, and balance transfers. The CFPB’s areas of concern are as follows:

  • Risk of Deceptive Advertising Practices: Card issuers often market promotional offers as an opportunity for the consumer to save money. The misimpression conveyed in the promotional materials is that the only cost of obtaining the promotional interest rate is the one-time transaction fee. Credit card issuers fail to correct that misimpression by failing to provide clear and prominent information about the cost of new purchases due to the loss of the “grace period.” Said conduct may constitute a deceptive advertising practice in violation of the Dodd-Frank Act.
  • Risk of Abusive Practices: Similarly, credit card issuers may be at risk of engaging in an abusive practice if they fail to provide adequate information alerting consumers that they will be unable to maintain a grace period on new purchases if they do not repay their entire balance, including any promotional balance, by the statement due date. Credit card issuers may take unreasonable advantage of consumers by failing to adequately inform them of these conditions and by exploiting their lack of understanding to impose additional costs.  Said conduct may constitute an abusive practice in violation of the Dodd-Frank Act. Continue reading this entry

Credit Card Issuers Beware: CFPB Fires Warning Shot on Promotional APRs


Who could possibly object to zero or low promotional interest rates offered for convenience checks, balance transfers or new purchases?

The Consumer Financial Protection Board (CFPB), that’s who.

In a new Bulletin based on its findings from examinations of large banks and card issuers, the CFPB warns that some credit card issuers may be engaging in deceptive or abusive acts or practices when promoting or offering promotional APRs, in violation of Section 1031 of the Dodd-Frank Consumer Financial Protection Act. According to the CFPB, some card issuers are failing to sufficiently warn consumers that their continued use of credit cards for purchases during a promotional period may forfeit the grace period on new purchases if the consumers do not pay the entire statement balance (including the amount subject to the promotional APR) by the payment due date.

Continue reading this entry

Federal Reserve Board Proposes to Repeal Its Regulation AA (Unfair Credit Practices)

acts and regulations

The Board of Governors of the Federal Reserve System is requesting comment on its proposal to repeal its Regulation AA, which for nearly 30 years has prohibited banks from engaging in specified unfair and deceptive credit practices.

In the Federal Trade Commission Act (the FTC Act), Congress directed the Federal Trade Commission (FTC) and the Federal Reserve Board to promulgate rules to define and prevent unfair and deceptive acts and practices. The Federal Reserve Board’s rulemaking authority under the FTC Act was limited to banks. Pursuant to this authority, the Federal Reserve Board adopted Regulation AA in 1985, closely following the FTC’s rule adopted a year earlier.

Regulation AA had prohibited banks from obtaining or using:

  • Cognovits and advance confessions of judgment;
  • Waivers of state law exemptions of property (other than collateral for a loan) from attachment;
  • Most assignments of consumers’ wages; and
  • Non-possessory security interests in household goods, other than purchase-money security interests.

In addition, Regulation AA prohibited banks from:

  • Misrepresenting the nature or extent of liability of co-signers;
  • Obtaining a co-signer unless certain disclosures were made; and
  • Imposing a late payment fee when the only delinquency is attributable to the failure to pay late payment fees on earlier installments (i.e., “pyramiding” of late charges).

Why is the Federal Reserve Board getting out of the business of regulating such practices? The answer lies in the Dodd-Frank Consumer Financial Protection Act of 2010 (the Dodd-Frank Act).

Continue reading this entry

Time is Running Out to Complain About the Complaint Portal

Consumer Financial Protection Bureau

You have 4 days! August 22, 2014 is the deadline to submit your comments in response to the Consumer Financial Protection Bureau’s (CFPB) proposed disclosure of consumer complaint narrative data. (

The CFPB maintains a public Consumer Complaint Database through which consumers may file complaints regarding financial services and products (commonly referred to as the “Complaint Portal”). The CFPB currently discloses certain complaint data it receives through the Complaint Portal. The data includes: the type of financial product, a general description of the issue, the consumer’s state and zip code, the name of the financial services company, the date the complaint was received and sent to the company, whether the CFPB has received the company’s response, whether the company’s response was timely, and whether the consumer disputed the company’s response. The company’s response is not currently included, other than one of the following general descriptions: dispute is in progress, closed with explanation, closed with non-monetary relief, or closed with monetary relief. The CFPB now proposes that in addition to the above information, it will publish the consumer’s narrative of the complaint and the financial services company’s response.

Continue reading this entry

Blast Fax Cases Now Harder to Certify

acts and regulations

Blast fax cases filed under the Telephone Consumer Protection Act just became harder to certify in Minnesota. On August 5, 2014 U.S. District Court Judge David S. Doty, in the case Sandusky Wellness Center LLC v. Medtox Scientific, denied Sandusky’s motion for class certification because the members of the proposed class were not objectively ascertainable.

Here are the facts. On February 21, 2012 Medtox sent an unsolicited fax advertisement to Sandusky.  Medtox is a toxicology laboratory that sells lead screening products. Because lead is particularly harmful to children, Medtox focuses its advertising on pediatricians, family practitioners and health organizations that work with children. It gathers names and numbers of potential customers from health insurance provider directories. Sandusky is a chiropractic clinic.

The February 2012 fax Medtox sent to Sandusky was intended for a family practitioner named Dr. Bruce Montgomery. Dr. Montgomery used Sandusky’s offices once a week to see patients. He had provided Sandusky’s fax number for placement in a health insurance provider directory. Neither Sandusky nor Dr. Montgomery gave express permission to Medtox to fax advertisements. The fax cover sheet did not indicate an intended recipient. Continue reading this entry