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RE: Universal Default

Established Contributor

RE: Universal Default

Is it true that the practice of raising your rate because you are late with another creditor is gone? I ask this question for the simple fact of account reviews. Since creditors are doing monthly reviews and say for example they see something they don't like, a late payment , a spike in your debt, decrease in scores.etc. Does that mean you will get a change in term notice that goes into affect in 45 days?
Message 1 of 7
6 REPLIES
Super Contributor

Re: RE: Universal Default

I think that creditors can close your card pretty much Anytime, but thy do have to give you a reason in writing.

If they decide to alter the terms of your CC agreement, they also have to tell you in writing, probably like you said, 45 days in advance or so....
March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 2 of 7
Mega Contributor

Re: RE: Universal Default


pizzadude wrote:
I think that creditors can close your card pretty much Anytime, but thy do have to give you a reason in writing.

If they decide to alter the terms of your CC agreement, they also have to tell you in writing, probably like you said, 45 days in advance or so....

+1




EQ FICO 548 3/3/16
Message 3 of 7
Established Contributor

Re: RE: Universal Default

Could be wrong but i am pretty sure they can still do it, but any current balances cannot be subject to the new, and horrible rates.
Message 4 of 7
Super Contributor

Re: RE: Universal Default

Hm, every credit card agreement I've ever read always says the Issuer can close the card at anytime for whatever reason without prior notice.

 

 

Message 5 of 7
Moderator Emeritus

Re: RE: Universal Default


plasticguy wrote:
Is it true that the practice of raising your rate because you are late with another creditor is gone? I ask this question for the simple fact of account reviews. Since creditors are doing monthly reviews and say for example they see something they don't like, a late payment , a spike in your debt, decrease in scores.etc. Does that mean you will get a change in term notice that goes into affect in 45 days?

This is true. Part of the Credit Card Act of 2009 says:

 

Other accounts can’t be used as the basis for raising your interest rate. This practice known as “universal default”, allowed late payment or defaults on other bills (such as utility bills) to be cause for raising your credit card interest rate even though those other accounts are not related to your credit card account.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".

Message 6 of 7
Highlighted
Valued Contributor

Re: RE: Universal Default


MarineVietVet wrote:

plasticguy wrote:
Is it true that the practice of raising your rate because you are late with another creditor is gone? I ask this question for the simple fact of account reviews. Since creditors are doing monthly reviews and say for example they see something they don't like, a late payment , a spike in your debt, decrease in scores.etc. Does that mean you will get a change in term notice that goes into affect in 45 days?

This is true. Part of the Credit Card Act of 2009 says:

 

Other accounts can’t be used as the basis for raising your interest rate. This practice known as “universal default”, allowed late payment or defaults on other bills (such as utility bills) to be cause for raising your credit card interest rate even though those other accounts are not related to your credit card account.

 

 

 

From a BK years ago to:
EX - 3/11 pulled by lender- 835, EQ - 2/11-816, TU - 2/11-782

"Some people spend an entire lifetime wondering if they've made a difference. The Marines don't have that problem".


The big problem with universal default was that issuers could, from one default, raise interest rates on all other existing balances through the roof and this resulted in a sort of avalanche effect where suddenly creditors were faced with payments they could not make.


My understanding of the Universal Default provision of the CARD act is that while it eliminates increases in interest rates on existing balances due to defaults on unrelated accounts it does not prohibit increases in interest rates on future purchases provided notice is provided 45 days in advance and, of course it doesn't prevent closure. Interest rates on existing balances can be raised only if one is 60 days late or more.

 

It's likely deteriorating credit from other accounts will result in AA including possible closure or increase in future purchase rates even if timely payments are made to the account in question.

 

 


I have reestablished credit over the last couple years
so my moniker is, well, rather out of date.

WM Discover $1800, WF Plat 12k, Chase Freedom Siggy18k, Amex Plat (60k H/B), Citi AA EWMC 25k
Message 7 of 7