Lending Club Blog

“Change in Terms” — What Banks Don’t Want You to Know

Did you know that many credit card issuers will charge you their default rates if you are late with a payment on a completely different account? This long-standing practice is called “universal default.” It can especially hurt cardholders if there are errors in their credit reports.

The way it works is that credit card issuers routinely pull customers’ credit reports to see if cardholders are current on their other bills. If they spot instances of delinquency on other accounts, they raise the consumer’s rate to the default rate as a way of penalizing the cardholder for late payments.

According to Consumer Action’s 2007 Credit Card Survey, many of the top credit card companies claim they no longer have universal default practices. In reality, card issuers have simply renamed the penalty and moved it to the “change in terms” section of the cardholder agreement. It often goes unnoticed by consumers.

Card issuers state in these sections that they can raise their rates at any time for any reason. Consumer credit information is often mentioned as one of the factors for such rate hikes. The Consumer Action link cited above contains the policies of the top ten card issuers.

It appears that Congress is upset about these practices. The debate is now whether to force industry standards through legislation, rulemaking or to allow card issuers to voluntarily come up with their own standards that hopefully eliminate these practices.

Monday, June 18th, 2007 at 2:20 pm

Comments (0)

Recommended

Welcome Home

Lending Club named #5 on Forbes’ Most Promising Companies List

Get ready for tax season with Lending Club’s Tax Form Guide

New Adjusted Return Metric

See more
Lending Club Awards
  • Archives z

Recent Posts

We’ve acquired a company!

Today we’re excited to share the news that we… Read More »
April 17, 2014

Lending Club customer information safe from Heartbleed Bug

You may be hearing about… Read More »
April 11, 2014

New: Loan Origination Data Update

An update for users of our platform statistics and… Read More »
April 3, 2014

Lending Club Launches Business Loans

Today, Lending Club announced the launch of business loans… Read More »
March 20, 2014

Lending Club Extends Privacy Protections for Borrowers

At Lending Club we pride… Read More »
March 19, 2014

How to Protect Yourself from Online Scams and Swindles

It is more important than… Read More »
February 11, 2014

New Statistics Charts to Help Investors Understand Returns

At Lending Club, we believe… Read More »
February 6, 2014

Welcome Home

I became a U.S. citizen earlier this month. When… Read More »
January 27, 2014

Lending Club named #5 on Forbes’ Most Promising Companies List

Lending Club has won the… Read More »
January 24, 2014

Get ready for tax season with Lending Club’s Tax Form Guide

Tax season is coming. To… Read More »
January 13, 2014