Credit Card Company Practices: Legality is Questionable

Bothell, WAHugh Gerrard had a credit card with Chase Bank and never made a payment late in 10 years—his credit rating was impeccable. But he made one mistake that cost Chase a loyal customer. "Because I overlooked an old balance of $20, my interest rate was raised to 29.9 percent from 5.99 percent," says Gerrard.

"Last April Chase made me an offer--to use a convenience check as a balance transfer," explains Gerrard. "They offered me a low interest rate of 5.99 percent so I thought it was a good deal. I wrote check for $2,700 to pay a balance from another credit card company—American Express.

Then I got a statement from Chase and paid $500 on my balance. But I noticed my interest rate went up to 29.9% from 5.99%. I called immediately. Their reply: I was late on a payment and my agreement was null and void, allowing them to revert to this higher percentage. Of course they didn't notify me that I was late on a payment.

Apparently I had a $20 balance that I hadn't paid—but I accept responsibility for this amount. However, Chase did not notify me; they didn't tell me that because I was late on this $20 payment, my rate would be excessively increased. Now, this increase could potentially cost me about $500.

I called Chase and said 'This isn't right, I have been a customer for 10 years and have an excellent credit history and I have documentation to back that up.' (In fact, Chase never reported to the credit report agency that I was ever late on a payment. I have a perfect credit history report--from two agencies.)

'I want your original agreement back with the interest rate of 5.99%,' I said to Chase. They said no. Next up, I asked to speak to a supervisor. He said no.

Then I searched the Internet. I found some information about my issue and credit card hikes on [LawyersandSettlements.com] and one of your lawyers got back to me right away. He suggested I pay them off, which I did. Then I closed my account. He said I am lucky that I have the means to pay them off. He gave me sound advice for free.

He also advised me to file a report with the Attorney General of the state of Washington. The Attorney General sent a letter to Chase on my behalf. I then received a letter from the Vice President of Chase. In the letter she said 'I am so sorry you closed your account and I would like to reopen your account with the same credit limit of $18,000 and offer you a convenience check for balance transfers at 5.99% for the life of the loan.'

Too late. I didn't respond, nor will I ever do business with Chase again.

Ironically my mortgage and car are financed through Chase and I never had a problem. But the credit card division is predatory and the legality of their practices is questionable. Shouldn't they inform you about raising these rates?

Chase refunded me $152 which was calculated as interest over a 30-day period. I would say that is an admission of guilt. I can go to downtown Seattle, find a loan shark at 30 percent and he would be more personable. These customer service people just say 'no'--I guess they would rather lose a 10 year customer.

The lawyer I spoke with told me that he has filed a class action lawsuit with the state of Washington to mandate that credit card companies (he specifically had a law suit against Chase) must inform you when they have a rate hike. I'm sure their customers agree."