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Here Is Your Interest Rate, Except When It Isn't

posted by Bob Lawless

Chase Offer Small Credit card companies often make you promises with fine print that nullifies the promise. The Simpsons episodes (maybe the best . . . . show . . . . ever) often will include an advertisement promising some great product with a voiceover that says something like "There is no promise the actual product will be as advertised. Too bad that only one of those is a gag.

A Credit Slips reader e-mailed with a story of how Chase had just decided to change his interest rate from a 3.99% APR to his choice of a 7.99% APR or a $10 monthly service charge and 5% of the minimum balance. This person had a great credit score, no missed payments or job loss, and the loan balance was modest (only about $1,700). Still, Chase had decided it was going to change the deal.

The 3.99% APR is a great rate, of course, and had been a "teaser" rate to get this person's business. To induce him to apply for the card, our reader had been promised a 3.99% APR on all balance transfers "until balance is paid in full." Our reader did the financially responsible thing and transferred his existing balance to this lower-rate card. He dutifully made sure he did not incur any new purchases on the card that would trigger a higher rate. Chase was apparently not making enough money on the deal and decided it was time to change the terms.

As many of our readers know, credit card companies reserve the right to change the deal at any time. That is part of the fine print we all get when the credit card company mails you the card. Fortunately, Federal Reserve regulations that will go into effect on July 1, 2010, will largely eliminate this practice, but until then, we're still in the world where the credit card companies can change the deal they made with you. Here is the kicker for this story: our reader still had the original advertisement he been mailed that promised the 3.99% APR. It appears above, and you can click on it to make it larger.

In great big letters, the advertisement promises, "3.99% 2nd and 3rd checks APR until balance is paid in full." An asterisk next to the "0% APR" promise leads to a very small notice that states "See enclosed insert for more details." In another post, I commented on how these "more details" in a solicitation aimed at lawyers eviscerated the deal that it looked like Bank of America was trying to offer. Does anyone honestly think that these advertisements would put a reasonable person on notice that the price at which they are borrowing is actually very different than the true price? Our reader was outraged at the sharp dealing from a bank that had just received federal taxpayer money, which is a good point. We should expect better from the institutions who are being supported with taxpayer dollars. As someone who tends to focus on the policymaking side of consumer credit, what outrages me are the claims of free marketers that we should get out of the way from fully informed buyers and sellers of credit. It is only the sellers who are fully informed.

Comments

Has this fellow consulted a class action attorney in his state? In California, the advertisement appears to violate quite clearly the Unfair Business Practices Act. "More Details" cannot possibly be interpreted to mean "We are not promising 3.99% for the life of the debt". Nor is an "asterisk" sufficient to cancel a promise that is otherwise clear and enforceable.

I do not practice such litigation, but know many who do. If he really wants to stop these practices (as do I) it would cost him nothing bring it to an attorney's attention, as they will be paid by Chase if they are successful. They won't bother with the case if they don't believe it has good merit.

For hundreds of horror stories about this very thing, see

http://www.consumeraffairs.com/credit_cards/chase_credit_cards.html

Includes some helpful phone numbers.

Also a NY lawyer is starting a class action suit.

http://www.gslawny.com/lawyer-attorney-1383679.html

It was a link on:

http://www.medlawplus.com/classaction/chasecreditcardcomplaints.tpl

The asterisk for "see enclosed insert for more details" is only next to the 0%. Yet there's none next to the 3.99% offer. Doesn't that mean that the enclosed insert doesn't apply to the 3.99% since it's not disclaimed; and it only applies to 0%?

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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