Thursday, September 30, 2010

Rate Jacking - Fight Back

(first published 11-25-2009)


Tis the season … when we are all spending money on the holidays - gifts, entertaining, travel, perhaps year-end charitable donations, etc.  And when the outflow is going faster that the inflow, we have what businesses call a "liquidity crunch".   I don't know what all of you do when you are being crunched like that, but I will take advantage of the credit card offers that fill my mailbox - the ones with the promotional teaser rates - 0% through August, 2010; 1.99% through 12-31-10.  Yes, I have learned to read the fine print - and have noticed the "transaction fee" has climbed in recent years from a minimum dollar amount to between 2-4% per transaction.  But paying even 4% for the money for a year is better than paying whatever the "regular rate" is.  Right? 

Well, with online payments, with direct payments from banks, with paperless bills, there are times when I have simply lost track of my due date, and have not paid the minimum payment on time.  And of course part of the fine print in the original teaser promotion cautions you that if you have any late payments, then that wonderful deal that you signed up for, that promotional rate good through some time into the distant future, is no longer going to be honored.  If you don't keep your end of the bargain - by paying on time and not going over your credit limit - then the credit card company does not have to keep their end of the bargain.  In fact, they have already pointed out to you what happens in this event - in the smaller print at the bottom of the promotional letter, where it says: "However, all of your APR's (including this offer and any other promotional APR's) may increase as permitted by law up to the 29.99% variable default rate if you pay us late, go over the credit line, or make a payment to us that is not honored."  That's certainly not what you expected if you signed on for one of these rates.  But unfortunately, that is what you bargained for.  You made the deal with the Devil, and now he is knocking on your door for payment.  I have seen this practice referred to as "rate jacking", and it is a colorfully descriptive term for what has occurred.  Your credit card interest rate is jacked way up because you have made a simple mistake.  One day late, and your holiday goose is cooked. 

However, all is not lost.  Under the terms of the Credit Card Act of 2009 which took effect on Aug. 20, 2009, the credit card issuer must now give you 45 days advance notice that they are going to jack your rate up due to a delinquency or default or as a penalty.  Also, effective in February 2010, the issuer cannot apply a penalty rate until the consumer is more than 60 days delinquent on the account.  So, if you make that late payment just one time, they cannot then change the deal and jack the rate up.  They must send you that 45 day notice, with language in it disclosing the proposed changes; the "effective date, and, a notice that you have the right to reject the changes.  They must also disclose if they are will suspend or terminate any future use of your account as a result of your rejection of the change.  The notice will give instructions—and a toll-free number—for rejecting the change or rate increase.   Follow the instructions carefully, and if you are successful in jumping through their hoops, the telephone voice tells you that you were successful, and gives you a confirmation number.  Now get caught up on your delinquent payment.  And then go and sin no more. 

The new 45 day notice does not apply to an APR increase upon the expiration of a specified period of time, as long as the creditor disclosed clearly and conspicuously in writing the length of the period and the APR that would apply after that period.  In other words, if the original offer said "good through August, 2010, with a rate increase in August, 2010", then your credit card company does not have to give you a new 45 day notice.  Similarly, if you have a variable rate that was disclosed at the outset, then you will not be receiving a new 45 day notice each time the index fluctuates.  In addition to the 45 day notice provision, there is another beneficial (to consumers!) new requirement:  the credit card issuer must adopt reasonable procedures designed to ensure that your statements are mailed or delivered at least 21 days before the payment due date.  That gives you plenty of time to make sure that next payment is on time. 

In summary - don't pay late; if you do, don't ever pay 60 days late if you can help it.  If you get the 45 day notice telling you that you are going to be rate-jacked, then don't make any new charges on that card until you have decided whether you want to reject the change.  Read on in the notice until you get to the part about rejecting the changes.  Follow the instructions for rejecting the changes, and note the confirmation number.  If you have any doubt about the consequences of rejecting the change, first call your credit card customer service number, speak to the rep and ask the question - "if I reject this change, and pay the delinquency, am I still allowed to use the card in the future?"   Write down the date of the phone call, the customer service rep's name, and the advice that you are given.  Then make an informed decision.  The rules are changing, and you as the credit card consumer have more rights as a result of the recent changes in the law.  Don’t be afraid to use them.  That will make for a happier holiday!

©2009  Douglas P. Humes

Doug Humes has been a practicing attorney in Pennsylvania since 1980.  He has experience in real estate, community, corporate and small business law, and estate planning.  In 2003, he opened his private general practice in an old Main Line mansion in Bryn Mawr.  Doug is also a Pennsylvania notary public and offers that service as an accommodation to clients.  You can contact him at Suite 210,  Tel: 610-525-7150, or via email at humeslaw@verizon.net).

Monday, September 27, 2010

Pennsylvania Home Improvement Consumer Protection Act

Over the weekend I overheard a conversation about home contractors:  “I found a way to get my contractor to call me back.  I told him I had his deposit check ready to pick up.”  That snatch of conversation highlights one of the complaints that people may have about some home contractors – they are not good at returning calls.  Personally, I have had that experience, but I have had many more positive experiences with good professional contractors who return their calls at the end of the day, and do the work that they say they are going to do, and meet me when they say they are going to meet me.  However, for the bad apples, the Pennsylvania legislature is trying to be proactive, and in 2008 passed a new law relating to home contractors.  The law took effect in 2009, and the state attorney general is beginning to enforce the law this year. 

The Pennsylvania Home Improvement Consumer Protection Act requires virtually all contractors who do “home improvements” (generally any work done at a person’s home with a contract price of more than $500) to register with the State Attorney General.  The registration seems fairly simple.  It requires some basic contact information on the contractor, but also asks them to report (among other things) on whether they have ever been convicted of a crime relating to home improvement fraud, whether they have been bankrupt, and whether in the last ten years they have had a judgment entered against them related to a home improvement transaction.  The act also requires them to show proof of insurance.  The contractor is issued a registration number, and then must use that number in all of its advertisements, contracts, estimates and proposals.  The law also provides certain minimum requirements for what must be in a contractor’s contract.  If any of the items are missing, then the contract is not enforceable.  The consumer is allowed to rescind the contract within three business days of signing it.  If the contract requires mandatory arbitration of disputes, the arbitration clause must meet certain requirements.  If the contract contains certain clauses (generally various waivers, hold harmless clauses and one sided clauses in favor of contractor), then the whole contract can be voided by the home owner.  If the contractor does not start work in a certain amount of time, you can cancel the contract.  The Act also defines certain actions as felonies or misdemeanors, and permits enforcement at the county level, and at the state level for those contractors working in more than one county.  A violation of this Act is also considered a violation of the state’s Unfair Trade Practices and Consumer Protection Law, which permits the consumer to sue the contractor for triple damages plus attorneys fees. 

So how does this affect you, as a home owner asking a contractor to do work at your home?  You should check to see if your particular contractor is registered by going to the AG’s website at:  http://www.attorneygeneral.gov/hicsearch/, or by calling the Home Improvement Registration Hotline at 1-888-520-6680.  You have a three day right of rescission if you change your mind.  If during the course of the work, you become unhappy with the work, the law has so many different requirements that a lawyer may be able to find deficiencies in the contract that may permit you to terminate it.  If there are clear violations of the law, you have a variety of civil and criminal remedies.  It is a very consumer oriented law.  

The website for the Attorney General states that they are starting to staff up to enforce the law, noting that lawsuits have recently been filed “against seven contractors accused of failing to start work, collecting excessive down-payments, not finishing projects, performing work in a shoddy manner, failing to pay refunds, not honoring warranties and other violations of the state's Home Improvement Consumer Protection Act.”  More information is available at their website.

The law cannot resolve all disputes among owners and contractors, and cannot force them to communicate well and return phone calls, but it may well scare away some of the worst past violators from registering, and it provides powerful remedies for consumers.  When considering a contractor, it is always a good practice to get quotes from several of them.  Check on their registration.  Ask to see their insurance coverages.  Request references and then check on them.  And as with any pitch, if something sounds too good to be true, it probably is.  Don’t get swindled by special offers and high pressure sales tactics.  Professional contractors want your business, but they want you to be happy with the work they do as well.  They want you to be a good reference for them.  The best way to have a good working relationship with your contractor is to hire a good one from the start. 

©2010  Douglas P. Humes

Doug Humes has been a practicing attorney in Pennsylvania since 1980.  He has experience in real estate, community, corporate and small business law, and estate planning.  You can contact him at  Tel: 610-525-7150, or via email at humeslaw@verizon.net.