Monday, November 17, 2008

Change of Terms in Your Credit Card Agreement -- How Do You Reject The New Terms?

This past weekend, Citibank customers began receiving letters in the mail regarding interest-rate changes to their credit cards. If customers don't agree to be bound by the new terms, Citibank says that customers will be allowed to opt out. Those who do opt out, the bank wrote, can continue to use their cards until they expire (at which point the cards would be canceled). Still, as easy as that sounds (and Citibank's opt-out process is actually relatively easy), customers can get themselves into trouble if they fail to opt out properly, which is why it's so important to follow opt-out instructions carefully.

Need to write an opt-out letter to Citibank? Use this one (link here)

To be sure, Citibank is just the latest in a string of credit-card companies to announce interest rate hikes (story link here). Last month, American Express said that it would raise rates by two to three percentage points on some of its customers. Nordstrom recently raised interest rates, applying the rate increase to every one of its 2 million customers (story link here).

Chase has also begun to hammer away at some of its customers. Customers have started receiving notices of account-management fees and higher minimum payments. For these customers, there is a $10 monthly fee and minimum payments are now pegged at 5% of the balance. Talk about steep. Chase is giving customers one of two choices: you either opt out, or you accept the new terms. If you do decide to opt out, you must pay the balance off and close the account by January 1, 2009. Luckily, Chase isn't also raising interest rates on these customers. That would be a triple whammy. Here is a copy of the letter that Chase cardholders (who are affected) are receiving (click to enlarge):

Citibank's opt-out procedure is relatively easy. In its letter, the company says that customers can opt out by calling or writing by January 31, 2009. If cardmembers do decide to call (866-565-7030), they should be prepared to give Citibank their account number. If a customer decides to write (Customer Service Center, P.O. Box 6218, Sioux Falls, South Dakota, 57117-6218), the customer should be prepared to give a name, address, and account number. Here's my advice: If you do decide to call, I would follow up with a letter anyhow. The opt-out procedure is a legal process and I treat it as such. As a result, I would absolutely do it in writing as well. After you've opted out, Citibank will allow you to keep the card open until it expires. The card will be canceled after that. Here are two examples of the APR letters that Citibank customers are receiving (click images to enlarge):

The Citibank Opt-Out Decision -- Everything You Need To Know (link here)

Bank of America, meanwhile, is a real stickler when it comes to opting out of its rate changes. Everything must be done in writing. Indeed, a phone call is not sufficient. You must send a letter to the address it specifies. The letter must include your name, full credit card account number, and state that you reject the proposed rate change. The letter must be typed or printed (if you write the letter by hand). Additionally, your letter cannot be sent with a payment or any other kind of customer-service request. In other words, the letter must be sent separately.

Bank of America is also quite specific about deadlines. Letters must often be written immediately. If your letter is not received by the deadline specified in the letter, your rejection of the new terms will not be effective. This means that Bank of America doesn't care about the postdate on your envelope. It wants the actual letter in its hands by the deadline. Don't screw that up.

Finally, you also agree to not use your Bank of America account after a specified date. If you do use the account -- by making new charges on the card or by using convenience checks from the bank -- the new changes will go into effect, regardless of whether you rejected the terms in a timely fashion. In other words, if you reject the rate increase, and subsequently use your account for any reason, your rejection is ineffective and you'll be bound by the new terms. If you have recurring bills that are tied to the card in question, be sure to remove those! A single slip up could cost you.

I can't emphasize this enough. If you receive a change in terms, and you want to opt out of the proposed changes, please be sure to write a letter. The letter, meanwhile, does not have to be lengthy and full of legalese. Just include the basic information that is asked for. If the card company wants your account number, phone number, and address, then write a single paragraph with that information in it. At the end of the paragraph, be sure to say that you reject the new terms.

Meanwhile, be sure to include a copy of the letter that the card company sent to you. That way there won't be any ambiguity about what you're doing. The company will know what you're rejecting. Do this even if the company says that you can opt out by phone. You can't keep a paper trail if you're using the phone. Which reminds me. Make sure that the company sends you a letter confirming your request. You need to have a letter proving that you actually opted out. Call and request a letter from the bank.

By the way, for those of you wondering, Nordstrom Bank's recently-announced interest-rate hike does not allow customers to opt out. The rate will go into effect, whether you like it or not. Even if you decide to close your account, the new interest rate (on your closed account) will be applied to your balance. It doesn't get more harsh than that (story link here).

Related Articles:

  • The Citibank Opt-Out Decision -- Everything You Need To Know

  • Citibank's Rate-Hike Strategy -- Where To From Here?

  • Citibank To Raise Interest Rates On

  • Citibank To Raise Interest Rates On Its Plastic

  • Citigroup On The Ropes -- Credit Card Customers Feeling The Pain

  • Sign Of The Times: Nordstrom Bank To Lift Interest Rates On Its Credit and Store Cards

    1. Sounds like CHAMU maybe next.....The whole financial mess...what a meltdown.

      As if things could not become worse!

      I'm in a bit of crisis now, see my blog....

    2. Yep. According to the Daily Telegraph, it looks as though Chase will have job cuts coming soon. See my story on Citibank's job-announcement this morning.

      Citibank To Slash More Jobs

    3. Received Citi letter today:
      1)was 8.99% APR for purchases,will be US Prime+18.99%,that mean 24.99% APR
      2)very interesting part:cash advance APR will be the same as purchase APR..?
      3)Transaction fee for foreign purchases-3% of each purchase...
      Have no idea,how Citi evaluates credit risk,but my credit profile is like this:FICO's from 721 to 744,have 4 Citi credit products totaling U$D 59000,currently utilized less than 1 % of available credit,never late or any other derogatory items.

    4. Anon, that's amazing. I'm amazed that Citi would give you that rate given your FICO scores and your overall utilization. Don't know what to say. I'm going to take your message and post it over in the Citi Raising Rates story thread.

    5. I received a notice from Chase Bank on Nov. 14th. They are raising my minimum payment from 2% to 5%, plus they are adding a Service Fee of $10 a month. I called customer service and got a cold response stating that the company was doing whats best for their bottom line.

      There is no "Opt Out" or any other option to disagree to the new terms other than closing the account.

      Has anyone else heard from Chase Bank?

    6. Philip, I am right on top of that. Quite a few customers have received those notices over the past several days.

      As you said, you have no options here. You either accept the terms or you pay the balance and close the card by January 1, 2009.

      I personally think that Chase is looking to mitigate risk with customers who have been slow payers.

      Would you mind telling me if you carry a balance on the card in question?

    7. Phillip, the opt out is the closure. That's the only way you can opt out of the changes. As you can see from my story, you must not only close the account, you must also pay the entire balance off.

    8. I really cannot see how Chase can not have an opt out, is it legal? This is total loan sharking. The new government is going to ream them for this!

      Makes Citi look like saints.

    9. Anon, absolutely legal. Nordstrom just did it to all of its customers. Rate hike across the entire board. No opt out allowed. Period. Unless there is an explicit opt out provision in the agreement, there is no rule against not having one.

      Sucks but true.

    10. There needs to be more outrage over these practices. I wonder if there will be a long term backlash against carrying a balance? I hope there is a sea change in our culture about spending.

    11. If anything, Anon, it just makes us all aware that credit card companies have the upper hand in these agreements. What's more, we all agree to them when we apply for the card and use it.

      Most consumers figure that the terms will never actually be implemented. We're now starting to see what we've agreed to.

      I started paying in full nearly three years ago. But I knew the writing was on the wall at the end of summer 2007. It was no longer safe to carry balances. That's why my site preaches PIF. I know that's it's not realistic for some of my readers, but it's a goal that all of my readers should strive for.

      It's my hope that my readers will ultimately get the debt paid down and then pay in full for the rest of their lives. You can only control your credit-card destiny if you are not carrying a balance.

    12. My husband and I each have our own Citi cards. Today we each received a letters regarding rate increase, but the letters are different. His letter talks about LIPTOR and mine doesn't. My shows a rate increase of 3 percent his doesn't. What is the difference in these letters?

    13. Anon, your husband's card is tied to LIBOR (London Interbank Offered Rate). Yours is likely tied to prime.

      Check to see if that's what it is. These are simply different rates that your cards are pegged to. You might be prime + 5.9% (just using that as an example). His could be LIBOR + 5.9% (example again). LIBOR and prime are at different levels, that's why your rates are different.

      Does that help?

    14. So nice that taxpayer money bails out these greedy companies, then these greedy companies turn around and screw their consumers...who are the taxpayers. I am furious. I hope consumers raise cain over this mess. It is ridiculous that these GREEDY *@#!*** get to do this to hardworking taxpayers!!!

    15. Anon, vent away. It is pretty dang ironic that we're bailing these guys out and we get a nice rate increase for our troubles.

      That's what happens when you're "too big to fail," though. Do whatever you'd like.

      I understand that this is biz, though. But it still sucks.

      Thanks for the comment.

    16. I posted this in another thread, but I realize that not every person will see that thread, so I am posting this in all of my active Citibank threads:

      Here is the language from the opt-out notice for Citibank:

      "If you opt out of these changes, you may use your account under the current terms until the end of your current membership year or the expiration date on your card, whichever is later. We will close your account at that time. You must then repay the balance under the current terms."

      This is where my law school training comes in handy. The first sentence refers to current terms. These are your current terms -- before an interest rate hike. So, they've defined "current terms" for us.

      Now, go to the third sentence. Citibank is saying that you will have to continue paying down your balance -- even after the card is closed. You must pay under the current terms. Having already defined current terms, we know that it means current terms -- before the rate hike.

      If Citibank tried to weasel out of that contract language, I can assure you that the consumer would prevail. It could be called ambiguous at best. And the court would weigh the evidence in favor of the consumer -- and against the drafter of the language (Citibank).

      So, my thought is that your current terms are locked in -- even after the card is closed. A lawyer wrote that opt-out clause. "Current terms" has the same meaning throughout.

    17. Just got some more incremental information from Citibank (I called and talked with a supervisor).

      Here's the deal:

      If you opt out, you will continue to have your current rate (prior to any rate increase). Moreover, your current rate will -- and can -- fluctuate with prime or LIBOR. Thus, even if your account is closed, you'll still see small fluctuations in the rate, because of prime or LIBOR.

      Therefore, if you have a 6.99% rate right now, and you opt out, your rate will remain at 6.99% even after you close the account. But your current terms also allow for small fluctuations tied to prime and LIBOR. So, your rate could move higher OR lower, depending on market fluctuations.

      NOW, moving to something else I just learned: if you opt out, but you miss a payment, go over your limit, or do anything wrong with the account, your rate could jump to the default rate. Again, your current terms allow that. And your opt-out terms would be no different.

    18. Here's a better copy of that Chase document.

      Chase November,22, 2008 Change in Terms Notice

      I get my Chase statements online (paperless) and their website has a handy "Inserts" column on the statements page.

      I called about it earlier tonight. The first rep said that she couldn't do anything about the fee, it's across the board to everyone (bad economy, tough times for Chase, blah blah). Asked to speak to and transferred to supervisor, she put me on hold to review account. She said it had nothing to do with a balance transfer I used to have. That it had to do with it being an Amazon card and Chase redoing contracts with them and other partners.

      Called back again an hour later new low level rep asked if just called. Mentioned WSJ article. She asked me if their was an opt out clause in my terms change notice. Said if no offer to opt out on notice then can't opt out. If could manager would've offered.

      Brief history of my Chase card: opened on 8/05 through Amazon. Used pretty regularly until 9/06 when got BT offer for 4.9% for life. Didn't use it until paying that off back in October and again using the card pretty regularly for the past two months.

      I guess this will be the second Chase account that will show opened and closed on my credit report. I had a Platinum Chase opened on 8/00 and closed on 10/04 when they wanted to increase my rate from 7 or 8% to 24 or 25% or something ridiculous.

    19. Well, the fee is not across the board, so the CSR was wrong about that. I have a Chase card, no such change to my account.

      You'll notice in my story that I said you could opt out only by paying the account off and closing it. There isn't a true opt out provision in the agreement. Fact is, there is no opt out provision.

      I'd be closing the account as well.

    20. I can help clear up what Chase is doing. I have had the account with Chase since the early 90's. Chase from time to time has made offers for a low fixed rate loan for the the life of the balance. In my case I took $14K at 3.9%. Of course I have never missed a payment,the card was never used for additional charges and the balance is now about $4100.00.
      When I called and asked why the fees and payment increase, I was told too bad that this is the way it is and if I did not like the fees and the increase min payment to 5% of the balance then I could

      A. Accept a new rate of 7.9% and payments at 2% for the next 2 years or

      B. Payoff the entire balance by Jan 09.

      If I take the 7.9 % option upon reaching the 2 year point the rate jumps to the current card rate which is currently 9.9%.

      I think their goal is to get you to switch to the 7.9% deal which I assume at that point lets them off the hook regarding the life of the loan part of the original loan agreement. Of course at that point they can do what ever they want.

      My advice tuff it up and pay the higher min payment, skip the lattes and movies - paying the 5% does accelerate the reduction of the outstanding balance.

      One question, I thought there was going to be new rules from the Fed and Comptroller in place early 2009 to rein in this crazy bank card company behavior.
      Any word on this?

    21. New rules coming, how can this help all of us?

      Will we get a sea of last minute change in terms????

    22. I Twittered on this yesterday. Regulations are coming, indeed.

      Anon, I think we've already seen a rush of moves by banks. Look at Chase, Citibank, Nordstrom, American Express. They've all pushed interest-rate hikes and fee increases at us. I'm not surprised to see this.

      Here is my Twitter entry on the coming regulations.

    23. A class action lawsuit has been filed against Chase. Any discussion about "they can do whatever they want" (not quoting anybody -- just the line of reasoning) is yet to be determined. As for me, I really don't have the time to wait 6 or 7 years. I was just quoted in the NY Times, and I'm not going to go quietly about this matter. I'm fighting back in the court of public opinion. If Chase wants peace, it will have to issue a press release (retracting this barbaric, coercive, change in terms notice).

    24. And for those interested, here is the story regarding Chase and Robert Lahm.

    25. And a copy of the complaint.

    26. Well, here's a twist. Citibank (AT&T card) sent me my statement, I went from 5.86 last month to 14.99 this month (10k balance). I called Cust. Service, and was told the only way to change it was to opt-out. I did so over the phone. That was last week. I called again tonight to follow up, and they had done the change to my account. Terms are payment as usual, 5.86, until paid off, not until card expiration. Kicker is, the friendly guy this time offered to do a balance transfer on any other balances at 3.99 percent until paid off, even at the situation of me opting out. I asked for info to be mailed to me stating that the 3.99 rate would never be raised through no fault of my own. Any comments on that? I currently have excellent credit AND an excellent payment history, no problems there. Any forseeable problems with possibly moving another credit card balance (11k) over to them for the 3.99 deal?
      other than that, my wondering on Citigroup getting bailout money, AND raising rates? Layman thinking says bogus on that deal.

    27. Sandman, sounds like a good deal. "Usually" life of the loan deals will remain good as long as you meet the terms of the deal (never be late, never go over the limit, etc.).

      But look at Chase. They have recently started implementing $10 monthly fees and raised the minimum payments to 5% of balance. Unless you opt out and allow them to raise the raise to 7.99%. Most people thought that those initial BT rates (at 2.99%) were locked in unless you screwed up.

      My point? Unless you have a signed contract that says they will NEVER change the terms of your deal (unless you screw up), they could.

      By the way, a class-action suit has been filed against Chase for the switcheroo.

    28. Chase explanation for the hikes.

    29. I have just read the legal complaint as above. That just pushes me more to be leery of making any deals of any kind with any other credit card co. I am expecting all I will get is the usual weekly/daily transfer balance offers with citi that I usually get from everyone, so I'm still not inclined to go that way. If I were to get a non-canned personal letter, now.. possibly a different story :) Lots of good info here.
      I think I'll wait and see how that case goes against Chase. I almost laughed when my CS rep offered to just send a check in the mail and allow me to look it over before deciding on agreeing to the transfer! I guess a word to the wise, NEVER let them just 'send' you something that could be binding. :)

    30. Sandman, you sound like a practical person. Good head on your shoulders.

      Stick around. Feel free to comment any time.

      Thanks for visiting.

    31. Thanks, and thank you for your time and efforts here. I plead guilty to the fact I didn't read much here before I posted, however, I see now that I am in a similiar position as almost everyone here!
      Is there a site to get a 'free' FICO score? The Big Three want to charge you a small fee amount, the last I looked around.

    32. Sandman, there are no sites that provide free FICO scores. Every now and then, you'll see a promo for a free FICO score. But it's usually available to the first 10,000 respondents. Those scores go fast. I point to them from time to time on my site.

      My readers usually use the FICO links on my site and apply the discount code of CPPSAVINGS. That gives them 20% off. And I, by the way, get a small commission whenever one of my readers uses the FICO links on my site.

      Unlike a lot of sites out there, I am very upfront about my financial relationship with FICO. If a reader gets a FICO score, and uses my links, I'll benefit.

      Just so you know.

      If you have any other questions, feel free to shoot me a note.

    33. I have also been battling with Chase about a CIT. The letter sent to me originally quoted an APR that was not much higher than what I already had. I chose not to opt out. After my opt out time period had expired they sent the "correct" APR information. When i called to inquire about tit they said my time for opting out had expired. I filed a complaint with the BBB. Now they are allowing me to opt out under my original terms, but they diod not mention a time frame to pay off the account. After reading this information I am thinking I should call them to be sure I do have any more surprises coming my way...

    34. I just received the 2% to 5% minimum payment increase letter from Chase. I've been a customer since 1998, have never been late on a paymnet, and have a 775 credit score. I called and got the canned response that the change was non-negotiable. I closed the account.

    35. I have two Chase cards, over many years achieving rather high credit limits. Recently received CIT advising of min payment increase from 2% to 5%. In the past several years, I received balance transfer/convenience check offers for 2.99%, 3.99% rate "until the balance is paid". These rates were considerably better than any bank loans, and I had used them in place of bank loans. Balances total around $40,000 and payments were $800 / mo. Called customer service last night and new payments will be over $2000 ! Was told no opt out or other option to avoid this change. Unfortunately, I can't pay off and close accounts. I don't know what my options are or really anything about this Class Action suit. How do these companies think they are going to get that much more per month? What they are going to get is more consumers filing bankruptcy and zero payments.