Regulators cracking down on no-payment financing deals
Share with others:
Last month, Smithton-based Levin Furniture urged customers to hurry in for their last chance to save hundreds of dollars with the company's popular three-year free financing deal.
"New banking regulations go into effect soon which will eliminate 'no payment, no interest financing'," the company said in newspaper ads. "You'll save hundred of dollars in interest charges, but you need to act now!"
Those ads may have been a bit misleading, however. While promotional offers allowing customers to defer minimum payments may be going away, there is no ban on no interest financing.
Regulators have been cracking down lately on credit card companies that allow consumers to skip minimum monthly payments for a certain period of time, a prohibition that has been in place since 2003.
But card issuers will still be free to offer no interest financing, the type of offer that allows Levin customers to buy a bedroom set today and avoid interest charges if they pay their balance in full by the end of the three-year promotional period.
The difference now is that because of the crackdown, customers will be required to make minimum monthly payments during that period.
"Some people were confused, thinking it was the end of all free financing promotions, which isn't the case," said Robert Levin, president of the furniture store chain, in an interview last week.
"We will continue to promote no-interest plans," but the combined no-payment, no-interest promotions that allowed customers to buy furniture and not pay anything for as long as three years is being eliminated, he said.
Mr. Levin, who operates a total of 14 stores in Western Pennsylvania and Ohio, said his ads produced an "overwhelming response" from customers who rushed in to take advantage of the expiring no-payment plan.
In September, the Office of Thrift Supervision issued a memorandum reminding card issuers about the 2003 regulation prohibiting card companies from waiving minimum payments.
First Published February 11, 2010 12:00 am
