One State Outlaws Universal Default; Will It Stand, and Will Others Follow?
Jeff at Credit/Debt Recovery caught this virtually unnoticed story from a couple of weeks ago:
The New York state Senate gave final legislative approval Wednesday to a bill that would ban “universal default” from being imposed on credit card holders in the state.
Universal default, which is provided for on most credit card agreements signed by consumers, allows card companies to adjust upward the interest charge rates if there are adverse aspects of a consumer’s other credit activities. That could include a person being late in paying their utility or cable television bills.
Sponsors of the bill sent to Gov. George Pataki Wednesday say it is unfair to penalize consumers with higher credit card interest for activities that have nothing to do with their payments on those credit cards.
As Moderate Mainstream noted many months ago, universal default, which I noted about a year ago has gotten way out of control, is akin to your landlord charging you a higher monthly rent because you were late with your water bill.
It will be interesting to see if credit-card issuers and other lenders challenge the law, and if it stands up. I also question whether the Comptroller of the Currency, the federal watchdog lapdog agency that supposedly monitors abusive banking practices (but has no problem with universal default) will attempt to claim it has sole jurisdiction in the matter. I would think that many more states will move to eliminate the practice of universal default if it looks like the coast is clear for the Empire State’s law.
Jeff at Credit/Debt Recovery also links to one of his previous posts about cards without universal default provisions and otherwise decent terms. Consider switching.
