Articles Posted in Credit Cards

Checkbook publishes useful reports on consumer products and services. They have an updated report on using credit card chargebacks in cases of defective goods or fraudulent charges of any kind.

The Fair Credit Billing Act gives consumers the right to dispute charges and withhold payment for goods and services that you didn’t accept or that weren’t delivered as promised. Consumers must first try to work it out with a seller (be sure to put it in writing), but if that doesn’t work, consumers should go online to the credit card company and ask for a chargeback.

Checkbook asked its members to share their credit card chargeback stories; members sent more than 100 emails, almost all of them success stories. Some shared negative experiences with credit card issuers siding with sellers, even when sellers clearly were in the wrong.

Does having too much credit hurt your credit score? Should you close credit cards to reduce your credit available? These are questions addressed by Barry Paperno a contributor to Conventional wisdom 20 years ago was that if a borrower had access to too much credit, he or she would be tempted to use too much credit and get in trouble. But in the 1980s, FICO did a study and found that there was no evidence that having “too much” credit would change the consumer’s behavior. The same research confirmed that open long-held cards in good standing are associated with lower credit risk. However, some mortgage brokers still cling to the myth that a borrower may have too much credit.

The number of cards a person’s hold is a minor factor in credit scoring. Closing them won’t change the number. Positive payment histories remain on credit reports for up to 10 years. FICO publishes a profile of common attributes of persons with scores greater than 785 which is interesting.



The Consumer Financial Protection Bureau is proposing that banks adopt a simplified credit card agreement that consumers can read and understand. Currently, no one reads the dense, fine print multi-page credit card agreements banks send to customers. The Bureau is endeavoring to change that. The Bureau has separated the key terms from the legalese, leaving a clear, readable document. Check it the proposed agreement here.

Surveys by the Consumer Financial Protection Bureau have found that the nine largest credit credit card banks represeenting 90% of the market have stopped hiking interest rates on customers’ existing balances, reduced penalty fees and all but eliminated overlimit charges as a result of the CARD Act enacted last year.

The CARD Act was passed to prevent vulnerable consumers from paying exorbitant interest rates and fees.

The Act allows banks to raise rates for new purchases and one bank periodically reviews accounts to do just that, according to the report. Five others raise rates on delinquent customers, and another bank is testing the practice.

Equifax has a judgment against it for more than a million dollars to a Bay Area man whose identity was stolen. While the consumer was hospitalized, an impostor used his identity to open fraudulent accounts. He found the fraudulent accounts on his credit reports from Experian, Equifax and TransUnion and disputed them. (See my blog on why to dispute in writing, Certified Mail, Return Receipt..

Equifax went to trial. The identity theft victim told the jury about trying to get Equifax to correct his report. Other witnesses testified about his damages. His expert explained why Equifax’s procedures fail to meet the requirements of the Fair Credit Reporting Act.

The jury agreed with the identity theft victim. It awarded him over $6,000 for economic damages, $315,000 for non-economic compensatory damages and $700,000 for punitive damages. The consumer does not have to worry about paying his attorney either. The Fair Credit Reporting Act makes Equifax liable for all his attorney’s fees and court costs.

Frequently people ask me how they can get the credit bureaus to correct inaccurate information on their credit reports. I always tell them to dispute inaccurate credit reports via letter sent Certified Mail, Return Receipt. Why do that, you ask, when I can dispute on-line or by phone? If you look at their websites, you know the credit bureaus encourage consumers to phone or email. It is almost impossible to find an address to mail a written dispute letter to.

There are COMPELLING REASONS to do your disputes in WRITING, Certified Mail, Return Receipt. If you have put it in writing and kept a copy and obtained a receipt you can prove exactly what information you provided and that they received it.

You want to provide the credit bureau with as much information as possible so it can conduct a thorough investigation. If you have names and phone numbers of people they should contact, provide them. If you have documents that prove your claims, enclose copies..

The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (“CARD” Act) goes fully into effect in February 2010. If you want to find out which credit card issuers are complying with CARD at this time, go to You can write in the name of your bank and find out to what extent the bank is in compliance. The major credit card banks are in compliance on some, but not all of the CARD requirements.

The site neatly summarizes the ten major protections afforded cardholders. They are protection from arbitrary rate increases through early notification, the right to have interest rates reviewed to see if they should be lowered, payments must be applied to the most expensive balances first, a ban on universal default, a ban on “double-billing,” no extra fees for paying by mail, by phone or online, payments received by 5 PM must be credited that day, cardholders must get 21 days from the date the statement is mailed to pay, banks are to provide warnings against paying only the minimum payments, and no marketing to kids without parents’ OK.

The Minnesota Attorney General sued the National Arbitration Forum alleging it was essentially a front for various large banks and collection agencies. NAF falsely held itself it out to be a neutral forum for processing creditors’ claims against consumers.

On July 19, 2009, the AG announced that NAF has entered into a settlement of the lawsuit under which NAF will immediately stop accepting consumer arbitrations of any sort. This is wonderful news for consumers and a major step towards getting rid of all mandatory arbitration clauses in consumer contracts.

704554_plastic_cash.jpgCharging too much on your credit cards is a good way to get into financial trouble. So, in this economic climate, it’s best to keep those cards in your wallet, right? According to an article in MSN Money, not necessarily so.

Banks are apparently taking a hard look at customers who don’t use their credit cards — or who don’t use them anough — and simply canceling those cards. The banks reason that closing rarely-used accounts lowers their risk profile, because getting rid of unused accounts limits the bank’s liabilities (potential available credit) compared to the bank’s assets. Also, simply maintaining those accounts is an expense. But closing an account also means that the customer’s available credit is reduced. You may not need that credit, but your credit score can take a big hit when an account is closed.

Credit scores are based on a complex formula. According to Craig Watts, spokesperson for Fair, Isaac, about 30% of your score is based on your credit utilization ratio — the amount of your debt in relation to the amount of your available credit. Watts says a person with a solid credit score of 720, for example, whose utilization ratio increases from 35% to 75% after a bank closes an account is likely to see her credit score plummet by several dozen points. The resulting score would be far less than the 760 (or higher) consumers now need to get the best rates from lenders. (See Mark Anderson’s January 6 post.)

Capital One Bank and the credit reporting agencies (Equifax, Experian and TransUnion) recently settled with our client who was the victim of identity theft. It took years for the identity theft victim to get Capital One to stop trying to collect on the account it opened for an imposter.

The story began when Capital One sent a pre-approved credit card application to our client at her former college apartment. Someone in the building got the application from the mail and used it to get a VISA card from Capital One in our client’s name. The imposter took $500 from the account, but Capital One quickly learned the account was fraudulent–a law enforcement agency told it that professional identity thieves had opened the account–so it closed the account and charged off the account balance.

That should have ended the matter, but it didn’t. A year later, Capital One sent another credit card application to our client at the same old address. The imposter again used the application to apply for credit in our client’s name and again Capital One issued the imposter a VISA card. This time it gave the imposter a $20,000 credit line and sent “convenience” checks that the imposter used to withdraw almost $18,000. When the imposter failed to make the payments, Capital One located and began to dun our client. She disputed the account, retained a different lawyer, wrote lots of letters. Nothing worked. Capital One sued her to collect on the account.

Then she contacted us.

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