NRF Seeks Overturn of 'Same as Cash' Ban

Washington, DC, Feb. 17, 2009 – The National Retail Federation has asked Congress to overturn recent Federal Reserve regulations that would effectively ban popular “same-as-cash” offers made by retailers, saying the interest-free finance mechanism is important to cash-strapped consumers during the current recession.

“What is important is that every year millions of consumers have access to something that otherwise would be unavailable: interest-free loans,” NRF Senior Vice President and General Counsel Mallory Duncan said.

“Tens of billions of dollars of purchases are made by the customers of NRF members. In a down economy, it is more than unfortunate that the Federal Reserve and banking regulators have seen fit to effectively ban these programs by making them financially unviable.”

The Federal Reserve in December issued a wide range of new regulations intended to improve disclosures that consumers receive in connection with credit card accounts and other revolving credit plans. Buried among the 1,500 pages of rules, commentary and regulations were a variety of provisions that would restrict circumstances under which interest can be charged to customers who enter deferred interest payment plans but don’t complete their payments on time.

Retailers expected possible regulations on how disclosures are made but, “Rather than effectively regulate them, the Federal Reserve has effectively banned these programs – throwing out the good with the bad,” Duncan said.

Commonly known as “One Year Same As Cash” (or for other periods of time), deferred interest plans are widely used by retailers to help customers purchase big-ticket items they need immediately but might not be able to afford to pay finance charges to buy.

Home appliance stores, furniture stores, jewelers and home improvement stores are among large users of the plans. Customers are allowed to finance a purchase for a set period of time and their interest is forgiven if they complete payments within that period, but if they fail to do so the plans revert to being an ordinary revolving charge program in which interest applies. Details vary from one plan to the next, however, leading to the Fed’s concerns about whether terms are too complicated to be easily explained to consumers.

The new regulations don’t go into effect until July 1, 2010.