topic Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination in Credit Cards

The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Darinox — Mon, 22 Feb 2016 04:50:57 GMT

The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the Equal Credit Opportunity Act (ECOA), which prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or because you get public assistance. Creditors may ask you for most of this information in certain situations, but they may not use it when deciding whether to give you credit or when setting the terms of your credit. Not everyone who applies for credit gets it or gets the same terms: Factors like income, expenses, debts, and credit history are among the considerations lenders use to determine your creditworthiness.

Section 1002.4—General Rules

Paragraph 4(a).

Scope of rule. The general rule stated in § 1002.4(a) covers all dealings, without exception, between an applicant and a creditor, whether or not addressed by other provisions of the regulation. Other provisions of the regulation identify specific practices that the Bureau has decided are impermissible because they could result in credit discrimination on a basis prohibited by the Act. The general rule covers, for example, application procedures, criteria used to evaluate creditworthiness, administration of accounts, and treatment of delinquent or slow accounts. Thus, whether or not specifically prohibited elsewhere in the regulation, a credit practice that treats applicants differently on a prohibited basis violates the law because it violates the general rule. Disparate treatment on a prohibited basis is illegal whether or not it results from a conscious intent to discriminate.

The aim of this topic is to discuss the "new" rules set forth by JPMorgan's Chase commercial credit cards in regards to discriminatory credit furnisher practices.

For those of you unaware - the rule says that those with five new credit cards within the past 24-months will not be approved for a new credit card application. Under the law "treating applicants differently on a prohibited basis is unlawful if the creditor lacks a legitimate nondiscriminatory reason for its action, or if the asserted reason is found to be a pretext for discrimination."

Chase will soon apply their famed 5/24 rule to co-branded credit cards as well, starting in early April. We can expect a timeline which will look something like this:

Currently, once past 5/24, you can not get Freedom, Sapphire, or Slate. You can get all other cards.
At some point in March, the INK cards will be restricted as well. We can still get personal and business co-branded cards.
At some point in April, all Chase credit cards will be included in the rule, and those past 5/24 won’t be approved for anything.

Quite recently as a result of the various credit furnisher marketing promotions happening like 25,000 miles upon sign-up, double cashback etc., or 0% balance transfers etc., credit cards are a convenient way for the average consumer to save drastically on everyday, general purchases, of course, taking into account the ability to repay at least 70 per cent or more of his balance. Taking credit can significantly contribute to one's wellbeing, as well as to credit furnishers as per the interests they get. I would rather pay interest on equal or less than 30 per cent of the credit card balance than directly buying the product. This will also contribute to better managing monthly money fluctuations and most importantly, it WOULD NOT prohibit the consumer from buying the product and/or service. Not to mention that the consumer will demonstrate a pattern of responsible behavior to other credit furnishers.

Many stores now offer 'store credit cards' with 0 % financing for 12/24 months as a way to alleviate consumers from cash fluctuations.

Considering the above, it is quite normal for a consumer to have more than 5 credit cards in two years period. If a credit furnisher or a store offers me a good deal and/or promotion while of course having the ability to repay, keep 30 per cent or less utilization (as reflected on one's credit report) why shouldn't I apply for a new credit card? Having more than 5 recent credit cards doesn't necessary mean a pattern of abuse i.e. so called 'churning' or irresponsible behavior.

But then of course comes Chase with unfair consumer practices quite discriminatory, in nature. Think about it for a second.

Here's my case:

720 FICO

No public record

No negative history

No negative items or DEROG

No payments missed

No loans

13 per cent utilization rating

12 credit card accounts opened last 9 months

Total credit line: $5,400

Time since oldest account: 9 months

Average length of accounts: 5 months

EDIT:

What is credit discrimination?

ON THE BASIS OF:

Race or color
Religion
National origin
Sex or Marital status
Age (as long as you are old enough to enter into a contract)
Receipt of income from any public assistance program
Exercising in good faith your rights under the Consumer Credit Protection Act.https://www.fdic.gov/regulations/laws/rules/6500-200.html

Credit discrimination is illegal. Under the Equal Credit Opportunity Act, a creditor can't discriminate in any credit transaction, including mortgages, against any applicant because of these factors:

Race
Color
Religion
National origin
Sex (gender)
Marital status
Age, unless the applicant is not legally able to enter into a contract
Receipt of income from any public assistance program
Exercising in good faith a right under the Consumer Credit Protection Act (such as disputing information in your credit report)

This means that a creditor may not use any of the above grounds as a reason to:

Refuse you credit if you qualify for it
Discourage you from applying for credit
Provide you credit on terms that are different from the terms given to someone else who is similarly situated to you, such as having similar creditworthiness
Close your existing account (Source: http://www.consumerfinance.gov/askcfpb/1255/my-application-loan-was-denied-because-my-credit-report-...

I am trying to reason that 5/24 policy is unfair simply because the applicant is not aware of the 'probable outcome' e.g. the denial. Wouldn't you be mad if you waste an inquiry on your credit report because of that or simple because of circumstances out of your control? A lot of myFico forum members are currently unhappy, as well as individuals from other third party commercial websites.

Yes you are right: people are getting rejected for credit everyday for various of reasons rational in nature such as 'length of time accounts have been established', not for 'you have x credit cards for (n) period'.

You keep posting about race, age, religion etc all of which has no bearing on the 5/24 rule. Yes, I do. Race, age, religion.. etc., are one of factors e.g. the protected classes of the ECON. The other factor is the exercise of your rights under the Consumer Credit Protection Act (which contains federal consumer credit laws like the Fair Credit Reporting Act) which is applicable for any person.

There is a point on the Consumer Credit Protection Act which stating that 'the Dodd-Frank Act prohibits conduct that constitutes an unfair act or practice. An act or practice is unfair when (2) The injury is not reasonably avoidable by consumers. Therefore making it applicable - now how the language is interpreted is, of course disputed - as of many legal documents..

ECON states that if this is true therefore it is considered discriminatory in nature. While stating that it is discriminatory in nature, it also states that the credit furnisher may had had this policy as to avoid other negative outcomes e.g. NOT TO achieve the seen 'discriminatory' effect. I don't think that Chase discriminates based on protected classes - it would be really irrational to think so. What I am trying to establish is in conjunction to exercise your rights under the Consumer Credit Protection Act under unfair acts or practices. The law says it this way - now it is up to you and possibly the court to determine the proper interpretation of this.

And yet you say: This was created for another purpose so forth and you are constantly arguing that this is not regarded as such. I respect your opinion but you did see that this is getting out of control with the so called 'contributers' that are trolling me. Instead of paying the three credit bureau's seperate subscriptions I was considering getting my reports through here. Now I don't see a value of doing that any more.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

redpat — Sun, 21 Feb 2016 20:53:18 GMT

Right unfair, I disagree.

It is what it is, no one should feel entitled because they disagree with the rules a Bank has in applying for their credit cards, their rules apply to everyone.

I don't understand what is unfair? Not even close to being discriminatory, having credit cards isn't a class of people, lol.

Just wait until you pass the 5/24 rule, what's the big deal?

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

CreditCuriosity — Sun, 21 Feb 2016 21:16:04 GMT

Oh this is going to be the topic of today/tonight..

Big banks can get away with murder as they have and continue to do. Currency manipulation, robo calling and the lists continue way beyond this.. They get slapped with a fine, but they make more money then the fine and continue business as usual as nothing criminal ever comes of it being the management will never see prision time for anything they do wrong 99% of the time. If they mess up big enough see 2008 we the tax payers will bail them out. Great life most of them have!

I don't believe the 24x5 violates any laws, but many other things banks do indeed to violate laws as mentioned above are only a few examples.

Looking forward to catching up on this thread later tonight.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Darinox — Sun, 21 Feb 2016 21:10:16 GMT

In my opinion --- being declined solely as a result of the 5/24 rule treats you differently from others because you do qualify, however you are being disqualified immorally for practices unrelated to credit or credit risk assuming that your credit report is perfect and you have less than 30 per cent overall utilization on all portfolio accounts.

a credit practice that treats applicants differently on a prohibited basis violates the law because it violates the general rule

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:09:37 GMT

^+1 I concur CreditCuriosity.

And I drop this tid bit for consideration...

Exclusivity.

Hope they raise their sign on bonuses for the amount of pause many myFicoans and other credit forums will now be giving, as IMO we are the minority opening more than 5/24. HINT CHASE, I love your business, HINT.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

lg8302ch — Sun, 21 Feb 2016 21:13:38 GMT

I am also not really disappointed by the Chase rule because I am all for conservative applications and 5 cards in 2 years does not restrict me too much. 9 cards in 12 months ? Serious..but you need to stop and Chase is doing you a big favor with this limitation. Head to the garden and in 2 years apply for a Chase card. With the Chase rule customers will think twice if they need a card or not and basically have to set their priorities. My own goal is to get a card every 6 months and like this the 5/24 rule of Chase does not interfere. I would even go as far as saying there should be more lenders going this route...not like for example Comenity which approves a ton of new cards and then all of a sudden closes the accounts again. That many new accounts in such a short period of time is a high risk behavior for any lender and IMO should be avoided anyhow even without the Chase rule. ..just my 2 cents.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Bankrupt2019 — Sun, 21 Feb 2016 21:10:35 GMT

If you don't like the companies policies don't apply for their cards. Seems pretty straight forward to me.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:11:42 GMT

@Darinox wrote:
In my opinion --- being declined solely as a result of the 5/24 rule treats you differently from others because you do qualify, however you are being disqualified immorally for practices unrelated to credit or credit risk assuming that your credit report is perfect and you have less than 30 per cent overall utilization.

a credit practice that treats applicants differently on a prohibited basis violates the law because it violates the general rule

The banks can (successfully) argue that the 5/24 rule is related to credit, as they may consider it aggressive credit seeking. You and I may see it differently, but a bank can successfully connect that practice to credit behavior.

And, since credit is a privilege and not a right, a specific bank can choose to include the above as part of its criteria.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Callandra — Sun, 21 Feb 2016 21:15:00 GMT

I also do not see how the 5/24 rule is violating the law in any way. "Too many inquiries/recent accounts" is a valid and common reason that all banks use to deny credit. Maybe Chase isn't publishing the 5/24 rule but it is aggressive credit seeking (let's face it, most Americans only have 2-4 cards so more than that, and more than that in a 2 year span is A LOT by the average standard).

It is not going to hurt Chase, if anything it will help them because it'll weed out the bonus chasers.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:23:47 GMT

@Darinox wrote:

Chase will soon apply their famed 5/24 rule to co-branded credit cards as well, starting in early April. We can expect a timeline which will look something like this:

Currently, once past 5/24, you can not get Freedom, Sapphire, or Slate. You can get all other cards.
At some point in March, the INK cards will be restricted as well. We can still get personal and business co-branded cards.
At some point in April, all Chase credit cards will be included in the rule, and those past 5/24 won’t be approved for anything.

Is this an opinion or based on something published? Just curious.

I was thinking that the focus of this was going to be that the reason they're going to include the INK and co-branded cards is that because by not doing that, they're 'discriminating differently' for one set of cards, vs. another. And that wouldn't seem to be an issue because each card has it's own set of requirements (ie: someone with new credit isn't going to get a CSP because it's a $5k min).

But I think the OP's point is that there's a problem with the 5/24 rule all together in that it's discriminatory. I think?

It's not any more discriminatory than saying you have to have score X, income Y, or payment history Z IMO.

You may not think 5 accounts in 24 months doesn't mean abuse/irresponsible behavior, but that's not your call to make. It's the banks'. Their money, their rules.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:25:33 GMT

@Callandra wrote:
I also do not see how the 5/24 rule is violating the law in any way. "Too many inquiries/recent accounts" is a valid and common reason that all banks use to deny credit. Maybe Chase isn't publishing the 5/24 rule but it is aggressive credit seeking (let's face it, most Americans only have 2-4 cards so more than that, and more than that in a 2 year span is A LOT by the average standard).

It is not going to hurt Chase, if anything it will help them because it'll weed out the bonus chasers.

Yeah, I was going to say if you ask 'the man on the street':

"What do you think about someone who's opened 5 credit cards within the past two years?"

I bet you'd get a lot more of 'OMG why would anyone do that? They have some kind of problem!' than not.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

JSS3 — Sun, 21 Feb 2016 21:26:30 GMT

You present sound arguments, but all I can think is, "Don't hate the player, hate the game."

It's their sandlot, their rules. They don't have to lend us any of THEIR money.

Convincing arguments though.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Darinox — Sun, 21 Feb 2016 21:30:11 GMT

Aggressive credit seeking, though how can they establish a claim whereas a large portion of the available credit is being unused? Where is the evidence?

The evidence, therefore, is the consumer report which reflects 13 per cent overall utilization and less than 30 per cent on each credit card; while one can generally be seen as 'aggressive credit seeker' as per more than 5 credit cards, which is in fact a blanket statement as evidence e.g. historic statement balance demonstrates the opposite.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Callandra — Sun, 21 Feb 2016 21:33:48 GMT

@Darinox wrote:
Aggressive credit seeking, though how can they establish a claim whereas a large portion of the available credit is being unused? Where is the evidence?

The evidence, therefore, is the consumer report which reflects 13 per cent overall utilization and less than 30 per cent on each credit card; while one can generally be seen as 'aggressive credit seeker' as per more than 5 credit cards, which is in fact a blanket statement as evidence e.g. historic statement balance demonstrates the opposite.

Banks don't need evidence. It is THEIR money and they can lend how they see fit.

And even if a lot of credit is not being used, that doesn't mean that someone one day might just go and run it all up (especially for those that have gotten a lot of credit in a relatively short time frame).

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Darinox — Sun, 21 Feb 2016 21:39:38 GMT

Thank you.

I just want to add something. It is not about 'me' or 'you'. It is not about the inquries. While this is seen as a personal preference, it is also about making the market a fair place. What is the difference between someone with less than five accounts and someone with more than five accounts assuming that both have low utilization? How does one with more than five accounts demonstrates a risky behavior with extremely low utilization or even if he repays with none?

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:43:43 GMT

@Darinox wrote:
Thank you.

I just want to add something. It is not about 'me' or 'you'. It is not about the inquries. While this is seen as a personal preference, it is also about making the market a fair place. What is the difference between someone with less than five accounts and someone with more than five accounts assuming that both have low utilization? How does one with more than five accounts demonstrates a risky behavior with extremely low utilization or even if he repays with none?

The 5/24 rule doesn't refer to whether you have less than 5 accounts or more than 5 accounts - it refers to whether you have applied for more than 5 in the last 24 months. In other words, you can still have 14 accounts that you opened years prior and that would not be a part of the rule.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:48:17 GMT

@Darinox wrote:
Thank you.

I just want to add something. It is not about 'me' or 'you'. It is not about the inquries. While this is seen as a personal preference, it is also about making the market a fair place. What is the difference between someone with less than five accounts and someone with more than five accounts assuming that both have low utilization? How does one with more than five accounts demonstrates a risky behavior with extremely low utilization or even if he repays with none?

You're failing to understand why Chase would institute the rule in the first place. It has nothing to do with risky behaviour. It has to do with them limiting their costs by preventing those who would apply for card after card to achieve bonuses. While some of us may not like it (I certainly don't), there is nothing illegal or discriminatory about this rule.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Anonymous — Sun, 21 Feb 2016 21:45:56 GMT

Darinox- try doing a google search for " credit bust out". Someone else referenced the term in another thread earlier today.

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

kdm31091 — Sun, 21 Feb 2016 21:46:31 GMT

I can see this getting ugly, so I'm saying my piece and getting out:

This is not unlawful, nor is it discrimination. If you want Chase's cards, you simply can't apply for a bunch of other cards. They're tightening their underwriting. So what? That's not against the law. It's not "you qualify, but they're discriminating against you because you have 5+ in 24"...it's "you don't qualify, because you don't meet the 5/24 standard which they have decided on".

Seems simple to me. Chase is gonna do what they feel is best for their buisness. They are weeding out reward abuse. This is one way to accomplish it. If you truly want a Chase card, you simply have to be patient and wait until you satisfy 5/24. If you want it bad enough, it's worth the wait.

The discrimination logic makes no sense to me. I can't get a Palladium card. I don't meet the criteria. Does that mean it's discrimination? Because only x amount of assets will allow me to get it? No...it means I don't meet the criteria!

Re: The "Chase" and the "5/24" rule: An open discussion of credit discrimination

Darinox — Sun, 21 Feb 2016 21:49:09 GMT

Absolutely right - they do not need evidence luckily there is the FDIC which regulates fair market practices. How is this fair when the sole reason is for more than five accounts opened with all the variety of credit available today?

"And even if a lot of credit is not being used, that doesn't mean that someone one day might just go and run it all up"

Certainly, though it also applies to the other party - one can diminish all the credit with less than 5 accounts, that's how a bank profits - by charging interest rates.