When credit card companies are sued, some of the common complaints include improper billing practices, fraudulent advertising, and failure to inform consumers of changes in credit card terms. While such lawsuits are not as commonplace as other types of civil litigation, they are increasing in number as the government clamps down on credit card issuers who aren’t playing by the rules.
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It is rare for a lawsuit against credit card company to be filed by an individual consumer. In most cases, lawsuits are filed by state attorney generals, consumer watchdog groups, or groups of consumers represented by a single law firm. In almost all of the cases, lawsuits are filed as class action suits, which simply mean that the lawsuit is being filed on behalf of multiple consumers affected by the behavior of the defendant.
Why are lawsuits against credit card companies becoming more common?
According to the most recent numbers put out by the Federal Reserve, consumer debt in America is on the rise. As of November last year, revolving credit had increased at an annual rate of 8.5%. Along with the increase in outstanding credit card debt usually comes more complaints from consumers regarding unfair practices by their credit card issuer. As those complaints increase, lawyers find more opportunities to file lawsuits.
For example, the California Department of Consumer Affairs actively encourages consumers to file a credit card consumer complaint if they believe they’ve been treated unfairly. Their website even lists the contact information for both state and federal agencies where complaints can be lodged. All of this information becomes public, giving trial lawyers a veritable field of information to harvest.
What are some examples of common lawsuits against credit card companies?
One of the most common reasons for filing a lawsuit against a credit card company is improper or unfair billing practices. In fact, these practices were the impetus for the federal overhaul of the credit card industry that produced the new rules of 2011. One of the largest examples of such a lawsuit came by way of the former First USA. First USA eventually became BankOne and then Chase.
First USA was served with a class action lawsuit a couple of years ago for changing the due date of payments without informing customers. Banking on the fact that most credit card users don’t pay attention to the fine print, they were able to catch them off guard and fool them into making late payments.
For every late payment that came in, they charged a $29 credit card late fee. After two consecutive late payments, they then imposed a penalty interest rate, which could be as much as 10 points higher in some cases. The company eventually settled out of court and ceased this practice.
Another very common lawsuit comes by way of credit card companies billing customers for products and services they never requested. Providian has historically been one of the largest offenders and was required to pay the largest judgment ever in U.S. credit card history. The $300 million judgment stemmed from a class action suit claiming Providian was charging customers for unrequested services like credit card insurance, and improperly assessing late fees.
Are there any consumer protections other than civil litigation?
The previously mentioned overhaul of the credit card industry was a topic of much debate when it was working its way through the halls of Congress. While there are some negative aspects to the legislation that was eventually passed it is, largely, a set of very helpful regulations that benefit consumers.
For example, the new regulations would have prevented the First USA practice of changing due dates without informing customers. The new rules state that such a change requires a 45-day notification, in writing, before it can be implemented.
Of course, as much as the new rules set up good consumer protections it is still the responsibility of the consumer to pay attention. Your credit card company could send you a notice informing you that were changing your due date, but if you get the notice in the mail and simply throw it away without reading it, you are still likely to find yourself caught making late payments and incurring penalties and higher interest rates because of it.
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