Fighting Abuses by Credit Card Companies: Know Your Rights

As the economy tightens, many people are beginning to take notice of tactics allegedly being used by the credit card companies to limit the rights of cardholders.

For example, on Friday (April 25), the U.S. Court of Appeals in New York reinstated a class action lawsuit against several large credit card companies. According to Reuters:

The credit cardholders "alleged that the banks … illegally colluded to force the cardholders to accept mandatory arbitration clauses in their cardholder agreements," according to the ruling by the 2nd U.S. Circuit Court of Appeals.

The cardholders argued the banks had violated antitrust laws "by refusing to issue cards to individuals who did not agree to arbitration," according to the decision.

The cardholders want the court to stop the banks from compelling arbitration, prevent them from "continuing their alleged collusion" and invalidate the existing mandatory arbitration clauses.

This ruling is not a finding of wrongdoing by the companies, however. It is only a decision that the lawsuit against them may proceed.

In the meantime, a number of state and federal lawmakers are exploring legislation to remedy what they see as abuses by the card companies. For example, Michigan Senator Carl Levin has stated:

[O]ver a dozen bills are now pending in the House and Senate to correct credit card abuses [including] bill [to] stop credit card companies from piling on excessive fees; charging interest on debt that is paid on time; charging so-called "trailing interest" that is added between the time a bill is sent out and the date the bill is paid; increasing interest rates on cardholders who pay their credit card bills on time (employing so-called "universal default"); and applying higher rates retroactively to pre-existing credit card debt…there is a shared focus on provisions to halt unfair practices that attempt to squeeze more money out of even the most responsible cardholders.

Of course, not everyone agrees that such measures will improve the situation. Eli Lehrer, of the Competitive Enterprise Institute, writes:

[T]he new restrictions that self-styled “consumer advocates” and their trial lawyer allies envision will result in immediate, sizeable interest rate and fee increases for the majority of Americans who pay their credit card bills on time. Quite simply, efforts to cap, reduce, and ban penalty fees and interest-rate hikes for bad customers will axiomatically lead profit-minded companies to seek returns elsewhere. Many will hike the annual fees and interest rates for everyone else. New ways to litigate likewise will create another lawyers’ payday while doing nothing to help ordinary Americans.

Those who live on limited incomes or fail to pay their bills on time—the supposed beneficiaries of the proposals—will also see themselves hurt. Many will be denied credit that bureaucrats decide they “can’t afford.” More will find they only qualify for the “secured credit cards”—which require a bank deposit against the credit line—that predominated in the dark days before deregulation helped banks figure out ways to extend credit to everyone.

As these cases make their way through the legal system, and the proposed laws make their way through the legislature, it is important for consumers to know their rights and to be very careful when applying for any credit card.

The Federal Trade Commission has information for consumers on line. In addition, persons facing mounting debt and legal action to collect credit card fees may wish to consult with an attorney who can assist them in asserting their rights during any collection process.

A Note On Contracts

A recent court case in New York City (as reported in the New York Post) serves as a reminder on the basics of contract law.

It might as well have been set in stone. A contract
written on notebook paper is legally binding - and worth $10.5 million to a Brooklyn Internet exec, a federal jury has ruled.

The decision is but the latest victory for Alfred West, 46, who has spent years battling the Newark, NJ-based telecommunications firm IDT over the pact's legality…. IDT had argued that the handwritten pact had no legal standing.

Many people do not realize that a written, binding, contract can be created very simply. Under New York law, a written contract is often created merely by the following:

• An offer or promise;
• An acceptance of that offer;
• Some form of consideration or payment.

In addition, not all contracts need to be in writing to be enforceable. In many cases, an oral agreement, supported by appropriate consideration, will create a binding contract.

Failure to abide by a binding contract can result in money damages or an order of “specific performance,” where the court directs a person to act in a particular manner to fulfill an existing contract. Furthermore, a contract may provide for additional penalties, or directives as to how a dispute between the parties will be tried before the court.

Consumers should be very careful whenever asked to sign any document. Furthermore, when in doubt, it is always wise to consult an attorney who can provide advice on contract law.

Defensive Driving Course Offered for Local Seniors

Seneca County's Office for the Aging is offering a defensive driving course in May:

This 2-day accident prevention course will be held on May 12th and 14th, 2008 at the Seneca Falls Community Center, 35 Water Street, Seneca Falls, NY.

This is for New York State drivers’ ages 50 and older. The course includes the effect of aging and medication on driving, adverse road conditions, vision adjustments, and accident prevention measures.

Participants MUST complete both days of the 2-day course to be eligible for a 10% reduction for 3 years of the liability, collision, and no-fault portions of their automobile insurance and a four point reduction on their driver’s license. There are NO TESTS and all materials are furnished as part of the $10.00 registration fee. CLASS SIZE IS LIMITED. The class will run from 1:00 pm – 5:00 PM.

For further information, please contact the Home Economics Program at (315) 539-9251. Registration is required.

Regardless of age, I encourage all drivers in New York State to participate in a defensive driving class every few years. As noted above, these classes can reduce insurance premiums and, in certain circumstances, reduce the "points" on a driving record caused by traffic tickets.

More information about defensive driving courses in New York State can be found here.

Beware of Email "Phishing" Scams

"Phishing" is a scam in which unscrupulous people use e-mail and fake web sites to obtain your confidential information, including your financial information. Once they have this information, they can steal your money, your credit or even--in some cases--your identity.

New "phishing" scams appear nearly every day. Some of the most recent ones involve:

• fake e-mail messages that appear to be official federal court subpoenas;
• fraudulent emails sent to a college's alumni, attempting to obtain login passwords;
• e-mails purporting to be from a credit union or bank, telling recipients that their accounts have been suspended due to a “billing failure” and directing them to follow a link to “unlock” their accounts.

The FDIC has created a web site to help people recognize potential phishing scams. They also give advice on what to do if you suspect that you've been a victim:

[I]mmediately contact your financial institution and, if necessary, close existing accounts and open new ones. Also contact the police and request a copy of any police report or case number for later reference. In addition, call the three major credit bureaus (Equifax at 800-525-6285, Experian at 888-397-3742 and TransUnion at 800-680-7289) to request that a fraud alert be placed on your credit report.

In addition, in some cases, an attorney may be useful to assist you in obtaining reimbursement or protecting your rights.

U.S. Supreme Court Upholds Death Penalty

From the Associated Press:

The Supreme Court upheld Kentucky's use of lethal injection executions Wednesday, likely clearing the way to resume executions that have been on hold for nearly 8 months.

The justices, by a 7-2 vote, turned back a constitutional challenge to the procedures in place in Kentucky, which uses three drugs to sedate, paralyze and kill inmates. Similar methods are used by roughly three dozen states.

[The] opinion did leave open subsequent challenges to lethal injection practices if a state refused to adopt an alternative method that significantly reduced the risk of severe pain.

Executions have been on hold since September, when the court agreed to hear the Kentucky case. There was no immediate indication when they would resume.

The Court's decision will not affect New York State's death penalty law. That law was declared unconstitutional by the New York State Court of Appeals in 2004 on other grounds. Furthermore, it is unlikely at this time that this state will pass legislation to cure the flaw in the New York law.

State levies fee on child-support payments

From Gannett News Service:

More than 345,000 parents who get child-support payments will have to pay the state almost $4.5 million in service fees annually starting immediately, state officials confirmed Monday.

The payments, $25 a year, were enacted as part of the state budget passed by lawmakers last week to meet a new requirement of the federal government.

The fee applies to all parents who receive child-support payments who are not on welfare and get more than $500 a year in benefits from the non-custodial parent.

Tax Scams - How to Recognize and Avoid Them

Be on the look out for tax scams as you prepare and file your income tax returns today.

A complete list of this year’s most common tax scams can be found here.