The mystery of multiple opt outs explainedSometimes you have to opt out of a rate increase more than onceBy Todd Ossenfort
Dear Credit Guy,
I
had a major bank credit card, the interest rate was increased but I opted out
of the increase with 8.99 percent and my account was closed in 2007. I am
continuing to pay off my credit card, but recently I noticed my rate increased from
8.99 to 12.24 percent. When I called about the increase, they said a
notification was sent to me about the rate increase and I had not opted out
again. So, my rate is increased. Is this legal? I thought it was the law that
if you opt out you can pay off your balance with the current rate, but it seems
even after you opt out, the rate can continue to increase and you have to do
multiple opt outs during the entire pay off process. -- Mohammed
Dear Mohammed,
It
is difficult to answer your question regarding the legality of increasing the
interest rate on an account where you have previously opted out of a rate
increase without reviewing the original cardholder agreement. However, the
large bank that issued you the card is likely to have a team of legal
representation, so it is very unlikely they would proceed with an illegal
action. In most cases, when you opt out of changes to your cardholder
agreement, the account is "closed" and you can no longer make
purchases with the card. Given that fact, many people would make the assumption
that it would not be possible for the card issuer to make changes to a "closed"
account.
I
asked a consumer attorney, Richard M. Alderman, and his response was, "The
account may not be really 'closed,' but is just inactive and no longer allows
any future spending. Until it is paid in full it is still 'open.' If that is
the case, the card issuer may still propose changes to the terms and the
consumer would have to reject them."
Should
you have access to your original cardholder agreement, you might want to take a
look at it and see if you can determine what happens to your account once you
have opted out to proposed changes to your agreement the first time. Even if
you can find it, you may not be able to wade through the fine print and legal
terminology to come to a definitive conclusion.
My
recommendation is that you open and review all correspondence from your card
issuer and continue to opt out of any proposed changes to your cardholder
agreement. Be sure to send a certified letter stating you are opting out with a
return receipt request.
This practice of requiring consumers
to opt out multiple times to changes in a cardholder agreement is new. It is
likely these actions are a direct result of the fact that the remainder of the
provisions of the Credit Card Accountability and Responsibility Disclosure Act
of 2009 (Credit CARD Act) go into effect in February 2010. The good news is
that the Credit CARD Act will prevent card issuers from these types of actions
moving forward. Specifically, your card issuer will no longer be allowed to
raise your interest rate due to universal default and can only raise your rate
for being 60 days late.
One
other important provision of the Credit CARD Act will require card issuers to
post their cardholder agreements on their websites, thus eliminating the guesswork
in what is allowed and what is not. Then you won't have to search for a
document years down the road; it will be available at the click of a mouse.
Take
care of your credit!
See related: How to opt out of a credit card rate increase, Not all issuers allow you to opt out of rate increases, Credit card video: How to opt out of an APR increase, Consumers gain right to opt out of credit card rate increases, A comprehensive guide to the Credit CARD Act of 2009
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
Send your question to The Credit Guy.
Published: December 11, 2009
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