New York State Senator Thomas P. Morahan today announced that he is co- sponsoring legislation that would ban the practice of "universal default" in New York State, which allows credit card companies to increase interest rates if a cardholder makes a late payment to another credit card company or even pays a phone or utility bill late. The practice has forced some consumers to pay twice the amount of their credit card bills because of interest and fees.
Universal default clauses are increasingly common provisions in credit card agreements that allow a credit card company to increase a cardholder’s interest rate or impose additional fees and charges based on the cardholder missing a payment to another creditor, such as a credit card company, mortgage lender, or the telephone company. Information about universal default is usually buried in the fine print of a credit card agreement.
Under the guise of good business practices, banking and insurance companies are developing financial practices that penalize everyone but the very rich in our society.