MONTREAL, Nov. 26 /CNW Telbec/ - With the Holiday season just around the corner, Option consommateurs wants to warn consumers about certain practices used by credit cards issuers that are likely to get them deeper into debt.
These are preferential introductory rates combined with balance transfers, cash advance cheques, reduced minimum required payments, payment holidays and cash back programs. "At first, consumers find these practices advantageous," says Maître Elise Thériault, a legal adviser at Option consommateurs. "In reality, however, it is the card issuers who usually benefit from them."
Let us take the example of introductory preferential rates, which are usually bundled with balance transfers. This product is addressed to consumers who already have one or more credit cards showing a high balance. They are offered the possibility of getting a new card and of transferring the debts contracted on the other cards over to this one. In general, the interest rate is very low, sometimes only 0.9 %. However, these rates are only good for a limited time. At the end of the so-called introductory period, the rate shoots up to the same level as for regular cards, sometimes even higher.
And that's not all. Sometimes the preferential rate is only offered on certain types of transactions, such as balance transfer. In the majority of cases, if consumers send in their payment late or go over their credit limit, they lose the benefit of the introductory rate. These observations are based on research that Option consommateurs carried out in 2009 with funding from Industry Canada.
As a result of this research, Option consommateurs recommends that the federal government take serious steps toward the introduction of a comprehensive legislative structure with regard to electronic payment, including credit cards. The organization also recommends that provincial governments regulate and monitor commercial practices related to credit cards and information disclosure. In Quebec, it intends to highlight this concern in the context of phase three of the reform of the Consumer Protection Act planned for the spring of 2010, which will focus on credit.
Finally, the organization advises consumers to exercise caution when they receive such offers and to read all the documentation attentively. "Consumers need to be careful when they accept these offers, because they can end up deeper in debt," Option consommateurs director general Michel Arnold warns.
About Option consommateurs
Created in 1983, Option Consommateurs is a not-for-profit association dedicated to the defence and promotion of consumers' rights. It has initiated thirty class-action suits and closely monitors issues related to the energy sector, the agri-food industry, financial services and business practices.
SOURCE Option consommateurs
For further information: For further information: Julie Gagnon, Conseillère aux communications, Option consommateurs, (514) 598-7288, ext. 226, Cell.: (514) 777-6133, firstname.lastname@example.org