The mystery of multiple opt outs explained

Dear Credit Guy,Ihad a major bank credit card, the interest rate was increased but I opted outof the increase with 8.99 percent and my account was closed in 2007. I amcontinuing to pay off my credit card, but recently I noticed my rate increased from8.99 to 12.24 percent. When I called about the increase, they said anotification was sent to me about the rate increase and I had not opted outagain. So, my rate is increased. Is this legal? I thought it was the law thatif you opt out you can pay off your balance with the current rate, but it seemseven after you opt out, the rate can continue to increase and you have to domultiple opt outs during the entire pay off process. . -- Mohammed

Dear Mohammed,Itis difficult to answer your question regarding the legality of increasing theinterest rate on an account where you have previously opted out of a rateincrease without reviewing the original cardholder agreement. However, thelarge bank that issued you the card is likely to have a team of legalrepresentation, so it is very unlikely they would proceed with an illegalaction. In most cases, when you opt out of changes to your cardholderagreement, the account is "closed" and you can no longer makepurchases with the card. Given that fact, many people would make the assumptionthat it would not be possible for the card issuer to make changes to a "closed"account.

Iasked a consumer attorney, Richard M. Alderman, and his response was, "Theaccount may not be really 'closed,' but is just inactive and no longer allowsany future spending. Until it is paid in full it is still 'open.' If that isthe case, the card issuer may still propose changes to the terms and theconsumer would have to reject them."

Shouldyou have access to your original cardholder agreement, you might want to take alook at it and see if you can determine what happens to your account once youhave opted out to proposed changes to your agreement the first time. Even ifyou can find it, you may not be able to wade through the fine print and legalterminology to come to a definitive conclusion.

Myrecommendation is that you open and review all correspondence from your cardissuer and continue to opt out of any proposed changes to your cardholderagreement. Be sure to send a certified letter stating you are opting out with areturn receipt request.

This practice of requiring consumersto opt out multiple times to changes in a cardholder agreement is new. It islikely these actions are a direct result of the fact that the remainder of theprovisions of the Credit Card Accountability and Responsibility Disclosure Actof 2009 (Credit CARD Act) go into effect in February 2010. The good news isthat the Credit CARD Act will prevent card issuers from these types of actionsmoving forward. Specifically, your card issuer will no longer be allowed toraise your interest rate due to universal default and can only raise your ratefor being 60 days late.

Oneother important provision of the Credit CARD Act will require card issuers topost their cardholder agreements on their Web sites, thus eliminating the guessworkin what is allowed and what is not. Then you won't have to search for adocument years down the road; it will be available at the click of a mouse.

Takecare of your credit! 

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