Changing Terms
Virtually all credit card agreements contain language that enables the credit
card issuer to change the terms of your agreement at any time. So a credit
card with a low interest rate could have a much higher rate down the road,
even if it’s supposed to be a fixed-rate card. Likewise, a credit card
with a long grace period can have a much shorter grace period at some point,
the annual fee can rise, etc.
To keep tabs on what your credit card issuer is doing with your account,
read the fine print on the filler material that comes with your monthly
credit card statement.
If you don’t like what you read, there’s little you can do about
these changes. As the California Court of Appeal wrote in one case:
The [card issuer]’s position is...based on the premise that a
credit card holder is always in a financial position to be able to immediately
pay off the entire balance when confronted with an unacceptable change of
terms. In fact, it is much more likely the reverse is true, and credit card
issuers must be aware of that. So…the practical result is the consumer
has no choice at all and is forced to “agree” to the modification.
In this case, the credit card company—Household Finance—tried
to change cardholders’ recourse in the event of disputes. The initial
agreement, which James Shea had received in 1993, said disputes would be resolved
in Illinois under federal law. Six years later, Household sent Shea a notice
that the “choice of law clause” was being changed to Nevada. Later,
it notified him that his account would require that “any claim, dispute
or controversy” be resolved through binding arbitration.
Shea tried to opt out of the arbitration clause. He contacted the card issuer’s
customer service department to inform it that he “was refusing to accept
the arbitration agreement being unilaterally imposed…and that [he] no
longer wished to continue using his account.”
Then he filed a lawsuit, which required the court to determine whether he
was bound to use arbitration. The California Court of Appeal ruled:
…enforcement of the provision would also fly in the face of California
public policy. {Shea] could not escape from the confines of arbitration.
The amendment states: “This arbitration agreement shall survive termination
of your Account as well as the repayment of all amounts borrowed hereunder.”
Even if [Shea] had done what [the card issuer] suggests, he still would
have been subject to the arbitration provision; there was no way for him
to opt out. …a good case could be made the term was unconscionable.
It’s a good idea to avoid cards that require you to settle disputes
through arbitration. If you do wind up having a grievance, you’ll have
to pay your own attorney’s fees through the arbitration process.
Next: Read Your
Statement. Really |
