2004-05-28 / Community

Pheffer: Prohibit ‘Universal Default’

Pheffer: Prohibit ‘Universal Default’

Assemblywoman Audrey I. Pheffer has announced that the Assembly Consumer Affairs and Protection Committee has passed legislation that she sponsored that will prohibit universal default, a commonly used practice by credit card companies that increases interest rates based on a credit card holder’s unrelated financial activity.

"Most consumers, even when reading through the fine details of their credit card agreements, do not realized that this type of provision means that the rate of interest on their credit cards will be impacted by late payments to other companies." said Pheffer. "This is the type of anti-consumer practice that the Consumer Affairs Committee tries to prevent.

People should not be penalized for a business relationship that has no bearing on the relationship with the credit card company."

The legislation, A.10212, prohibits credit card issuers from increasing interest rate or imposing fees upon accounts of holders based on indebtedness or late payment to other creditors.

This practice of raising rates on card holders for non-related financial activity is commonly referred to in the small print of credit card agreements, which is known as "universal default".

"I hope that by bringing attention to this issue we can enact legislation such as this to protect consumers from these hidden provisions," said Pheffer.

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