Coinciding with the implementation date of the new CARD rules is a deadline for retailers to start complying with federal regulations that cover installment-loan purchases.
You know, those popular “no payments, no interest” for 12, 24 or 36 month deals on furniture, appliances, and electronics. (The catch, for purchasers, has always been to pay off the debt before the grace period is up or get jabbed with retroactive interest on the entire loan.)
Well, last week in my region, an area furniture chain was airing aggressive TV spots trumpeting the demise of these loans and urging consumers to beeline it in ASAP for a last crack at the “same as cash” deals.
Turns out that banking regulators back in 2003 wanted financing companies to start charging a minimum monthly payment – mainly to keep consumers cognizant of their looming debt, though the zero-percent terms were still allowed. Lenders slacked off, and last fall (an amazing six years after the 2003 guidance) the Office of Thrift Supervision issued a reminder and gave creditors until Feb. 22 to whip up the correct paperwork and start charging consumers at least 1 percent of their outstanding balance each month.
The deadline coincides with the CARD implementation and while the two aren’t related in law, they are in spirit, both being aimed at more clarity for borrowers. And since economy watchers are praying for a hike in consumer spending to keep us out of a double-dip recession, anything – even a measly 1-percent payment – that could deter big-ticket purchases – is likely to be viewed with dismay by merchants and manufacturers.
I’d hit this story fast and use it as a peg to check up on home-improvement big box stores too; they use similar enticements to promote sales in their remodeling departments.