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Credit Card Abuse Takes on Many Forms

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Freeland, MICredit card abuse can take on many forms—including the personal data you entrust the credit card company to hold safe on your behalf. However, that is not always the case, as witnessed in January when data from 650,000 credit cards was at risk of being compromised after a computer tape went missing.

GE Money handles credit card operations for J.C. Penny as well as a number of other retailers. A spokesperson says that the missing tape includes Social Security numbers for 150,000 people. J.C. Penny was not responsible for the situation, GE Money says.

Identity theft is a growing problem in America. Last year, according to the Identity Theft Resource Center, the number of records compromised in the US was 125 million, a six-fold increase.

Credit ReceiptHowever, credit card abuse is more often than not demonstrated at a basic human level.

Janet Hard's story is a familiar one. The Michigan mother of two was using her Discover card in an attempt to make ends meet, and had planned to pay off the balance once her teenaged boys were grown. Instead, she noticed that instead of her balance moving downward as she made her regular payments, the figure wasn't moving at all.

That's because unbeknownst to Hard, the card issuer had raised the interest rate on her card from 18 to 24 per cent. There was no advance warning, or notification. It just happened.

She had been making her monthly payments faithfully, and yet her interest rate still went up. And the reason, according to the card issuer, was that her credit score had gone down for reasons unrelated to her Discover card.

Hard testified before the Senate Permanent Subcommittee on Investigations in January of this year as to her plight, and solicited a great deal of support from Subcommittee members who feel that credit card companies need to do a better job of not only communicating changes in interest rates and other matters with the card holder, but should consider reforming their practice of upping the interest rates based on credit scores.

Senator Carl Levin (D-Michigan) noted that Chase Bank has indicated it will no longer raise interest rates on credit cards based on credit scores.

The credit card companies argue that the entire issue is a matter of risk, and that it is necessary to have the ability to raise interest rates on a high-risk group, of which apparently Hard is a member. Without it, the companies state, risk would have to be spread over a wider group, essentially resulting in higher rates for everybody.

There was no mention of the ease with which consumers can gain access to credit cards, discounting means of affordability.

Levin, together with Senator Clair McCaskill (D-Missouri), have introduced a Bill that would limit the reasons for which a credit card provider could raise interest rates.

In an interesting aside, most credit card customers don't realize that just as the card issuer has the power to raise the interest rate and not tell you, what they also don't tell the consumer is that it's possible to request a lower interest rate.

The reason for this is the very competitiveness of the industry. The last thing a card issuer wants is to lose your business, and the cash flow that comes with it. As a result, a savvy consumer can call the number on the back of the card and negotiate a lower interest rate.

Admittedly, there are certain criteria that will work better than others. It helps if you are a long-time customer, with an excellent payment history. And chances are if your current rate is, say, at 12 per cent or lower, you won't get a reduction. However, if you're a good customer with a relatively high rate and threaten to take your business elsewhere, you'd be surprised at what could happen.

The CBC in Canada tried an interesting experiment. They walked through a mall and, picking people at random, gave them the use of a cell phone and provided a script, inviting them to call their credit card company and ask for a rate reduction. They were to say that they were being courted by a vast array of competing credit card companies for their business (which is true, we all are...), with very attractive offers, and before they proceed to pay off their balance and close the card, the cardholder needed some kind of incentive to stay.

In over half the cases, the callers got an instant rate cut. Not all callers did, and some had to haggle a bit more than others. But all were amazed to find that after a couple of minutes, they suddenly had an interest rate that was on average six, to eight percentage points below what they had been paying previously.

Indeed, credit card abuse is rampant. But sometimes you can hit back. If you can't negotiate, you might want to seek legal help.

READ ABOUT THIS LAWSUIT

Credit Card Rate Hikes Legal Help

If you have been a victim of any unfair practices by your credit card company, including substantial rate increases, unfair penalties or broken promises, and would like to take a stand by participating in an action against them, please contact a lawyer involved in a possible [Credit Card Abuse Lawsuit] to review your case at no cost or obligation.

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