One of the most recent cases involves a number of co-branded MasterCard accounts issued by Citibank. According to a recent report from MSNBC, Citibank had "decided to close a limited number of oil partner co-branded MasterCard accounts" that included Shell, Citgo, ExxonMobil and Phillips 66-Conoco oil partner cards.
John Ulzheimer, president of educational services for Credit.com told MSNBC that banks will sometimes discontinue accounts arbitrarily and have been doing so with increasing regularity over the past 18 months—although mostly on a case-by-case basis.
"Every once in a while you'll get a huge pop in one particular card product," he said.
Ben Woolsey, director of marketing and consumer research for CreditCards.com noted that Citibank posted $8 billion in consumer credit losses for its third quarter earlier this month. The bank is also bracing for a continuation of credit card defaults as the economy continues to languish, noting that delinquencies typically track the unemployment rate, which is high.
However, consider the story of one Citibank consumer who feels somewhat disenfranchised after Citibank cancelled her card.
MSNBC tells the story of Shannon Burdette, whose Shell MasterCard was rejected after she used it for a fill-up. Upon calling the customer service number on the back of the card, she was told the account was closed because something untoward had appeared on her credit report.
But her credit score was fine. The only entry was the closure of the Shell MasterCard, "closed at credit grantor's request." Meanwhile, Burdette and her partner had used the card regularly and always paid the bill on time.
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What's more, not all cards were discontinued. Citibank was still accepting applications for the products and marketing incentives connected with their use.
While credit card reform will soon be coming on-stream, there is no current or forthcoming law that prevents credit issuers from closing accounts without warning. That right comes tethered to every card issued, but is only spelled out in the fine print.
While the closing of a credit card may not always damage an individual's credit score, it sometimes happens. Such a result, generated by the arbitrary closing of an account without just cause, may result in lawsuits if a consumer's current and future financial well-being is adversely affected.