Hidden Agreement Terms

• "Arbitration Clauses"
• "Performance-based Pricing"

1.  "Arbitration Clauses"

Corporations are increasing their use of arbitration clauses in consumer agreements for the purpose of denying consumers the ability to assert their rights.

Most states allow credit card companies to add arbitration clauses just by sending a notice in the mail. You do not even need to see it to lose your right to a jury trial or a class action. Arbitration clauses are found in contracts with insurance companies, investment brokers, car dealers, student loan companies, mortgage lenders, computer warranties and internet agreements hidden under the button for "I accept" or "Agreed."

Corporations spend millions of dollars lobbying state and federal legislatures and litigating in Court to force consumers into arbitration. Their goal is to prevent consumers from joining together in a class action because class actions allow consumers to assert their rights.

If you have been damaged by a company, but your claims are covered by an arbitration clause, it is unlikely that you will find an attorney to take your case. If that happens, please write your Congress person, senator or state legislators to register your voice against unfair arbitration clauses.

2.  "Performance-based Pricing"

Credit card companies use what they call "performance based pricing," sometimes called "risk-based pricing," to set interest rates on credit cards. You may have experienced performance-based pricing if the interest rate on your credit card took a sudden jump without prior notice to you. This occurs when the credit card company pulls your credit report and concludes that your level of credit risk has increased. Any negative change -- like late payments, delinquencies, higher credit limits on other accounts or reduced income -- will trigger the increased rate on your credit card.

Not all credit accounts have performance-based pricing. To determine if it applies to your account, you will have to read your Cardmember Agreement. If you do not have a copy of your Cardmember Agreement, you should request one from your credit card company.

Consumers should be wary of credit cards that have any form of performance-based pricing. Credit card companies run repeated credit checks to see if the consumer’s risk level has increased, so the lender can raise the interest rate without prior notice. Ironically, each time the creditor pulls the report, the consumer’s credit score goes down.

Beginning December 1, 2004, under the Fair Credit Reporting Act and the Fair and Accurate Credit Transactions Act a creditor or financial institution that uses performance-based pricing to increase a cardholder’s interest rate must provide a notice to the consumer:

• identifying the consumer reporting agency furnishing the credit report,
• disclosing that the terms are based on consumer report information, and
• describing how to obtain a consumer report free of charge from the consumer reporting agency.

The notice must be oral, written, or electronic and comply with regulations that the Federal Trade Commission will enact.

Please click here for a summary of your rights.