The Ban on "Universal Default"
Did Congress' effort to protect you from your card company with the Credit CARD Act inspire you to pore over the new Cardmember "Agreement" that probably arrived in your mailbox this week? I actually read at least part of mine, looking in particular at the implementation of the Credit CARD Act. (I am apparently one of the "consumer advocates" that Ronald Mann thinks has the time to "scrutinize the agreements and bring attention to provisions sufficiently onerous that they would not bear public scrutiny.")
The first place I looked in the Cardmember Agreement was the paragraph labeled "Default/Collection." I was looking for the much-touted restrictions on universal default. Here is what I read, to my initial surprise: "Your account may be in default if any of the following applies: . . . we obtain information that causes us to believe that you may be unwilling or unable to pay your debts to us or to others on time." Wait a minute. . . That sounds like my default (or purported default) on my debts to someone else is a default to JPMorgan Chase. Isn't that what "universal default" is?
Actually, no, at least not as defined in the legislation. The Credit CARD Act prohibits raising "any annual percentage rate, fee, or finance charge applicable to any outstanding balance" with a few exceptions. Notably absent from the list of exceptions is the ability to increase those charges based on a cardholder's default to other creditors. But of course that is not what the JPMorgan Chase agreement permits. Rather, it says that I can be in "default" for being unwilling or unable to pay debts due to others, not that my charges can be increased. Under the Cardholder Agreement, a default permits JPMorgan Chase to close my account without notice and require me to pay my unpaid balance immediately. That is pretty grim result for a late payment to another creditor, even if it is not "universal default."