| Let's look at a real world example: A woman | | | | to lobby Washington, arguing it is the consumer that |
| purchased a new $4,000 large screen TV a few | | | | needs to be held accountable to the terms and |
| months ago based on the knowledge her monthly | | | | conditions of the contract, neglecting the most |
| payment was going to be $175, and based on the | | | | important element, that they are equally accountable |
| 9% interest rate charged by her credit card | | | | to the same terms and conditions of the agreement. |
| company. For five months straight she made all her | | | | The Clause was introduced in the mid nineteen- |
| payments on time, but in the fifth month she was | | | | nineties, after seeing an influx of bankruptcy filings in |
| late paying her mortgage bill, for reasons unknown. | | | | America. The credit card industry, fearing huge |
| She found out a month or two later that her credit | | | | losses, decided to enact this little known clause |
| card company doubled her interest rate to 18%, thus | | | | referred to as "The Universal Default Clause". Simply |
| increasing the payment for the TV to about $190 | | | | stated, they feel the credit card companies should |
| per month. Even though she was never late on any | | | | have the right to increase one's APR if a consumer is |
| other payments, she found most of her other credit | | | | late on any other credit card or debt entity, including |
| cards raised their interest rates as well. Even her car | | | | outside bills such as phone, cable or utilities. This |
| insurance company raised their rates. The net effect | | | | clause is purely an excuse to collect more money for |
| was she ended up paying nearly $200 per month | | | | credit card companies who invoke the clause. |
| more because she was late on a single mortgage | | | | Surprisingly enough it comes at a time when many |
| payment. | | | | cardholders need monthly relief, not additional financial |
| This is a common result of a very little known or | | | | strain. This clause creates a natural conflict between |
| understood clause found in nearly every credit card | | | | cardholders and credit card companies, and generates |
| agreement today. How would you feel if the | | | | an adversarial relationship that leaves everyone bitter. |
| company who sold you a product, based on certain | | | | According to the Office of the Comptroller of the |
| arrangements (including the interest rate), called you | | | | Currency (OCC) this is considered an unfair practice |
| up and said they were increasing your monthly | | | | and has recently labeled it "Unacceptable". The Clause |
| payment for reasons that have absolutely nothing to | | | | is usually hidden under the "Other APR's" section. |
| do with them? Is this really fair? | | | | My Advice: Please read each credit application |
| Let's take this a step further. Could any customer call | | | | carefully and avoid any card with this clause. Currently |
| a company, that had sold them a particular product | | | | out of 45 banks issuing 144 cards, 44% use the |
| on payments, and tell them the re-payment to the | | | | Universal Default Clause. |
| company will now be lower because they had missed | | | | Phil Andrews is currently the VP of Business |
| a payment to one of their suppliers? Of course not. | | | | Development for Precept Financial Solutions, a leading |
| This Universal Clause is extremely one- sided, making | | | | debt settlement firm based in Dallas, Texas. For more |
| consumers victims of what one could easily ascertain | | | | information, go to or call toll free 800-584-0855 and |
| as an unjust and unmerited practice. | | | | press option 2. |
| Yet many powerful credit card companies continue | | | | |