March 4, 2009

Retailers anticipate new interest rule

U.S. retailers are pulling away from deferred interest programs in advance of a federal rule change, the National Retail Federation said.

The rule change, which goes into effect July 2010, involves deferred interest provisions in transactions frequently advertised as no interest, or same as cash transactions, USA Today reported Wednesday.

In the common vernacular, these deals are written in fine print, hidden from customers or at least not routinely pointed out or explained to them.

The interest payments, however, can add 50 percent to the cost of an appliance or a couch, the newspaper said.

The Federal Reserve is scheduled to clarify the rule in April, but until then, whatever (the Fed's) intent, it's unclear enough that a lot of retailers are curtailing these programs because they don't want to be caught holding the bag, NRF spokesman Craig Shearman told the newspaper.

Retailers are claiming eliminating the deals would hurt customers. Editor in Chief of Furniture Retailer Ray Allegrezza said the impact would be a nail in the coffin for furniture retailers, considering that 70 percent of them offer deferred financing.