February 22 marks three years since key provisions of the Credit Card Accountability Responsibility and Disclosure Act (the CARD Act), which overhauled credit card practices, took effect. But gaps in consumer protection remain, Consumers Union said in comments submitted Tuesday February 19 to the Consumer Financial Protection Bureau (CFPB).

The CARD Act protects consumers from the most egregious harms done by credit card companies, but we think the CFPB should do more to protect consumers. We’ve asked the CFPB for additional reforms in these areas:

  • Penalty fees should be lowered, penalty interest rates capped, and consumers provided an easier path to follow to escape penalty rate hikes. 
  • Deferred interest credit cards should be banned.

We called for the ban on deferred interest cards because we think these cards are abusive, confusing traps for consumers. A deferred interest card waives the payment of interest for a period of time, but if even a dollar of principal remains when the deferral period ends, the interest that has been accruing since the purchase date – including interest on the money already paid back – is added to the account balance in one lump sum. This often prolongs the payoff period by months or even years, driving up financing costs on these accounts. In fact, financing costs on deferred interest accounts can increase more than 27 times as the result of paying off an account just one month behind schedule.

Have you been burned by a deferred interest credit card? Share your story with us!