Credit Card Laws Clarify ‘No Interest’ Ads; Bans '0%' Term

No interest plansTo entice consumers, furniture and big appliance retailers have relied heavily on “No Interest No Payments” promotions – telling consumers they don’t have to pay for months or years  – in television and print ads.
The credit card reform laws taking effect Monday do not ban such plans, as some media reports and retailers themselves have suggested. But the sweeping Credit CARD Act does provide strict guidance on the language now required in the promotions to avoid confusing consumers.
The promotions must include language that is “clear and conspicuous” and include the term – “if paid in full” – preceding any disclosure of a deferred interest period.
The Federal Reserve gives these two examples as proper language under the new laws: “No interest if paid in full within 6 months;” or “no interest if paid in full by December 31, 2010.”
In addition, the credit issuer cannot “disclose a rate as 0%” in a deferred interest or similar plan, the Fed stated.
In its “final rule” issued last month, the Fed addressed the so-called “deferred interest” plans extensively and came to the conclusion that the promotions serve a purpose – despite calls from consumer groups to ban “no interest” advertisements completely.
Consumer groups believed that regulators “should go further and ban ‘no interest’ advertising as deceptive when used in conjunction with an offer that could potentially result in the consumer being charged interest reaching back to the date of purchase,” the Fed stated.
But the Fed said it “believes that deferred interest plans can provide benefits to consumers who properly understand how the product is structured.”
In addition, the Credit CARD Act requires that credit issuers apply “excess payments” first to the balances during the last two billing cycles of the deferred interest period “so that the consumer can pay the balance in full and avoid deferred interest charges.”

One thought on “Credit Card Laws Clarify ‘No Interest’ Ads; Bans '0%' Term

  • April 6, 2010 at 12:01 pm
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    I think Macy’s practice of not allowing a consumer to chose to pay extra on their special event purchases is criminal. I made a special event purchase with 0% interest until 9/2010. Based on the new law any extra amount I want to make over and above the minimum payment will go to the interest rate account. what this means to me is that in September the 0% account will have to be paid in full or I will be charged deferred interest of over $600. Tell me how this is fair. I have been paying the special event charge so as to make sure it is paid off by September. How can this be remedied?

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