Aug. 28, 2009 at 8:00 AM ET
Millions of Americans have been told their credit card terms are changing for the worse this year. The only way to ward off the changes -- such as higher interest rates -- is to put the card on ice and stop using it.
Meanwhile, more than 100 million credit and debit card numbers have been stolen recently, and unauthorized credit or debit card charges hit nearly one in 10 consumers every year. This can make for a toxic combination.
Steve Abshagen got one of the unhappy notices from Bank of America in March, indicating his interest rate was going to jump from 9.9 percent to 14.95 percent. Abshagen was a former MBNA customer until Bank of America acquired that firm's credit card users, and the change came as a surprise. While he carries a "five-digit balance" on the card, he says he's never missed a payment. BofA hiked his rate anyway, in a change that would have cost him about $850 more per year in finance charges.
But Abshagen reads his mail carefully, and spotted the customary "opt-out" alternative offered by Bank of America. He could decline the change in terms and agree to pay off his balance at the lower rate, as long as he never used the card again. Abshagen took that option, mailed in his opt-out notice, and began using a different card for new purchases.
All was well until last month, when Abshagen received his monthly statement from the bank. His minimum payment had jumped by $75, and his interest rate was raised to 14.95 percent.
The reason? An unauthorized charge to his credit card.
Abshagen says he made a purchase at Amazon.com and while he entered his new card to
complete the transaction, Amazon accidentally charged his old card, which the site held on file from previous purchases.
He noticed the charge immediately and had it reversed, but it was too late. That single transaction had triggered acceptance of the higher rate, according to Bank of America, and now he was on the hook for a 50 percent interest rate increase.
Abshagen got on the horn to Bank of America, but the company offered little help.
"The woman was pleasant and she told me she could request from another department that they lower my rate, but she could not promise anything," he said. She couldn't even give him an answer, he says. "She said that if the request was successful the lower rate would show up on my next statement." In the meantime, he'd have to pay his current bill, she said.
That seemed unfair to Abshagen, who didn't want to make the higher payment. He threatened to withhold any payment to the firm until the matter was resolved. The call ended in stalemate.
"I refuse to pay a cent on this card until I receive a note saying they've given me the lower rate," he said. "They're the ones who violated the agreement, not me."
When asked to investigate the matter by msnbc.com, Bank of America spokeswoman Betty Reiss told msnbc.com that she couldn't comment on individual consumer's accounts for privacy reasons.
She did say, however, that the bank’s policy holds that unauthorized charges should not cause a customer's rate to increase -- and that Abshagen's lower rate had indeed been restored.
"If we determined there was a charge that is unauthorized we would reinstate (the customer's) opt-out status, which is what we did in this case," she said.
Abshagen said he received a call from a Bank of America representative indicating his lower rate had been restored a few minutes after msnbc.com's inquiry.
RED TAPE WRESTLING TIPS
Consumer Union attorney Gail Hillebrand said Abshagen was lucky to have a happy ending, mostly because he was diligent about reading his bills.
There are dozens of ways that consumers can lose their opt-out status -- and get socked by higher rates, she said. Many consumers link automated monthly bill payments to their credit cards -- such as cable TV service, Internet service, or even mass transit system payments. Even one missed charge could trigger the higher rate.
"That can be a pain. You find yourself asking, 'What's my login so I (can) stop payment?’" she said. "You'll have to know what all those bills are.”
A refund credit to the card could also trigger new terms. And of course, so could a thief’s unauthorized purchase. Earlier this month, the Justice Department announced that a single suspect had led a crime ring that stole about 130 million credit cards, nearly one for every adult American consumer. A study by security firm Gartner indicated that 7.5 percent of consumers were hit by ID fraud last year, with most victims of credit or debit card fraud. Given the widespread prevalence of interest rate notices and identity theft, it's likely more consumers will find themselves fighting to restore their opt-out status, Hillebrand said.
"Just as a matter of decency, the bank should restore the rate in that case. Of course, with banks, you can't count on decency," she said. Consumers in this situation should file an identity theft affidavit with the Federal Trade Commission and file a police report, and send a copy of both to the credit card company as a plea to restore the opt-out status and the lower rate. She urged consumers to also write to the Federal Reserve, which is right now developing new rules for consumer rights when credit card companies change their terms of service, and recommend that the agency make it easy for consumers to avoid new terms and higher rates.
Become a Red Tape Chronicles Facebook fan