The Truth of Credit

We here at TOC have written about the “Cardholder’s Bill of Rights” numerous times over the last few months. Today, we are going to discuss the one issue that without a shadow of doubt needs to go; the Universal Default Clause. The Universal Default Clause works simply like this: If you are late on any bills (i.e. Cable, Auto Mortgage or Medical Bills) the lender of the credit card has the right to raise interest rates on you, even when you are on time with their payments. Granted many lenders, after a lot of pressure, have stopped implementing the clause or have refused to invoke their right. There is currently nothing in Federal law that prohibits this practice; the law only requires that lenders disclose it in writing.

Here is the kicker though: Most people do not read their cardholder agreements. There are many hidden gems in there like the personal information disclosure, dispute requirements etc… We will get into those topics at a later date.

The TRUTH is that the Universal Default Clause should be banned. It is simply unethical.  If you are going to charge me up to 24% on the money borrowed when I am late to someone else because you aren’t making enough money to be profitable at my standard rate, then something is wrong with your business model. The eventual banishment of this clause will be a minor victory for the American consumer in a war that they have been losing for a long time.

If you enjoyed this post, make sure you subscribe to my RSS feed!