Did Congress’ effort to protect you from your card company with the Credit CARD Act inspire you to pore over the new Cardmember “Agreement” that probably arrived in your mailbox this week?…
The first place I looked in the Cardmember Agreement was the paragraph labeled “Default/Collection.” I was looking for the much-touted restrictions on universal default. Here is what I read, to my initial surprise: “Your account may be in default if any of the following applies: . . . we obtain information that causes us to believe that you may be unwilling or unable to pay your debts to us or to others on time.” Wait a minute? That sounds like my default (or purported default) on my debts to someone else is a default to JPMorgan Chase. Isn’t that what “universal default” is?
Actually, no, at least not as defined in the legislation. The Credit CARD Act prohibits raising “any annual percentage rate, fee, or finance charge applicable to any outstanding balance” with a few exceptions. Notably, absent from the list of exceptions is the ability to increase those charges based on a cardholders’ default to other creditors. But of course, that is not what the JPMorgan Chase agreement permits. Rather, it says that I can be in “default” for being unwilling or unable to pay debts due to others, not that my charges can be increased. Under the Cardholder Agreement, a default permits JPMorgan Chase to close my account without notice and require me to pay my unpaid balance immediately. That is pretty grim result for a late payment to another creditor, even if it is not “universal default.”
In her presentation on the need for a consumer finance watchdog at the Roosevelt Institute session yesterday, Elizabeth Warren made the argument (not quite this crisply) that the complex agreements that financial firms foisted on consumers were not proper contracts, in that there was no way that most consumers could evaluate what they were agreeing to (this gets to the notion we’ve discussed earlier, of good faith and fair dealing. While the contracts may conform to the appearance of contracts, they violate these fundamental premises that undergird all agreements).
And there is no reason these agreements need to be this complex. She noted that the Bank of America credit card agreement, when you include all the riders incorporated in the agreement, runs to 30 pages. In 1980, its credit card agreement was one page long.