— Grant Madden, EDN
Credit is a way of life in the United States today. You could walk into five different businesses the day before Thanksgiving and have a line of credit within 15 minutes. In Oregon, the Equal Credit Opportunity Act ensures all consumers are given the same opportunity to obtain credit. That doesn’t equate to an assurance of being given credit, as the usual factors of income, expenses, debt and credit history will determine the level of credit obtainable on the initial application.
For a number of years I have had my personal vehicle repaired at a national chain tire store. I’m known by first name, get invitations to preview new products, receive the monthly email and generally receive good service. Recently our third daughter obtained her learners’ permit. With four vehicles operating, it is inevitable that at any time, one of the cars will be in for work. Daughter #2 had bald tires so her car was next in, and later that day, I saw the temperature rising on my own car. With both cars in the shop and a potential $1000 bill, the pitch came.
“Can I put that on your Firestone card?”
I didn’t have one when I drove in, but fifteen minutes later I did. I even received an additional 10% off my repair. Back home I looked at the two page terms of service: the credit charges, annual percentage rate and the important Section 3: Credit Limit.
Section 3 states “The credit limit of your account is the total maximum amount we allow you to owe us at any time. We may increase or decrease your credit limit at any time at our option. The reasons for the change may include, for example, your credit history, your default, fraud prevention or changes to this card and policy.”
The Firestone card gave me a $1000 limit, which I accessed for the daughter’s tires. The next day, I called the credit card company, Credit First National Association, and I explained that I was going to put a second charge on my newly issued card. I also explained that I wanted to pay the existing balance before the second charge. The call center operator was able to take my payment, and the balance was paid out. The operator explained that as I had made the payment prior to 5pm Eastern time, the amount would be credited to my account immediately. Later that night, checking online, my banking institution reported the amount had left my account. I printed off the credit card statement which showed payment being made, and the available balance: enough to pay for my own car repair.
Two days later, at 1:45pm on Friday afternoon before the long weekend, the Firestone store called. Work had been completed on my vehicle, but there was a problem.
“Can you call the credit card company, please?” the store manager asked.
Telephoning the credit provider, I had to negotiate the usual recording of information, which included the balance of my account and the available balance. Upon reaching a real person, I got the information I was looking for:
“Credit is being refused because you are a new customer and have insufficient credit.”
The credit company went on to explain that as I was a new customer within the first thirty day window, they planned on refusing me access to their previously authorized credit. When the issue of available credit arose, the credit company agreed I had sufficient balance to access the credit, but they were not prepared to extend the credit.
“Your payment has been accepted. However, funds have not been received.”
Banking institutions use an intermediary clearinghouse to process payments. This accounts for the two or three day delay between when funds are debited and when it appears on your statements. As I would learn, it’s also one of the avenues that banks earn their revenue from. Even though the bank was reporting “payment made and funds forwarded,” the credit agency was claiming “payment accepted but funds not received.” This, however, was in contravention of my copy of the account, taken directly from their website.
“Your account may not be accurately documented,” was the response I received.
With daylight running out, their credit outranked my payment, and my vehicle wasn’t going anywhere until I could level the commercial interchange. The workaround was simple: request a refund of the payment made two days earlier.
“It will be posted to your account in five to 10 business days,” I was told.
Two days for a payment to reach the credit agency and 10 business days to return? Something was amiss, but it was more important to get the vehicle out. I wrote a check to the store for the repair, pulled out of the driveway and haven’t been back since.
Days later, I penned out my grievance. Credit providers are required by the Fair Credit Billing Act to respond to all credit disputes within 60 days. A grievance was sent by registered mail with a return receipt, required to be signed upon collection. The credit provider failed to respond, and therefore, not only is the credit provider in breach of federal legislation, my grievance is held as valid by virtue of their silence. While putting together the dispute, (“Why can I be refused access to approved and available credit?”), I discovered that not all credit providers are as squeaky clean as their image might have you think.
The Better Business Bureau reports receiving multiple complaints against Credit First National Association, but no prior occurrence in which access to the available credit was denied. A search of the names of several other businesses revealed similar complaints being received against them. Federal and state legislation prohibit any type of discrimination on access to credit, but the details of those complaints and court proceedings cannot be divulged because of privacy laws.
The Oregon Attorney General maintains a consumer complaint database where inquiries can be made by the public. Upon checking here, I found there were no recorded grievances against the credit provider listed. However, for the service provider, there are multiple grievances relating to the provision of service. Most of those grievances correspond with the complaints lodged at various consumer-oriented sites, identifying disputes with the credit provider. One of those grievances identified was that this credit provider does not report credit limits to the three credit reporting agencies. An essential part of the raising your credit score is the debt to credit ratio. By not reporting a credit limit, the credit provider effectively raises your debt ratio, and thereby lowers your credit score.
The failure of the credit provider to respond to my dispute, coupled with the new-found evidence of not reporting the consumer credit limit forced, me to examine my credit report. Each year, consumers can order a free copy of their credit report and review their personal credit history. AnnualCreditReport.com provides a link to each of the three credit bureaus: Experion, Equifax and TransUnion. After obtaining a copy of the credit report, the credit provider had already reported me as delinquent in regard to the transaction. The date of the breach fell within the 60 days. That’s also a breach by the credit provider, which can be brought up for enforcement. Referring back to the Terms of Service, Section 27, it requires complaints be dealt with via arbitration.
This subsection alone will eventually prohibit the consumer from taking a judicial course of action against the credit provider, but it is the same course of action that the credit provider would take against the consumer; the credit provider will want the consumer in court so they can pursue costs against the consumer. Clearly the credit provider does not want to be in court in order to prevent the consumer from pursuing costs against them.
It appeared to be a lop-sided situation. The credit provider could provide credit, the consumer must meet the terms and condition of the provision of credit, but the credit provider could arbitrarily deny access to the credit- not because of delinquency, but because they claimed they had not received payment?
Behold, the United States Code, Commerce and Trade, Chapter 41, Consumer Credit Protection. Section 1693f. It deals with the resolution options for the consumer. The protection itself requires the consumer advising the credit provider, within 60 days, that their account contains an error. The subsection goes on to define all acts which constitute an actionable issue, and that includes: “an omission from a periodic statement of an electronic funds transfer affecting the consumers account which should have been included.”
A credit card company cannot withhold access to funds when their periodic statement showed acceptance of a payment, and in this instance, available credit. The burden of proof hinges on the financial institution knowing the consumers account was not in error when such error could not reasonably be drawn from the institution. The penalty for such action for an individual is a minimum payment of $300 and a maximum payment of $3000 if the matter is allowed to proceed to court. Arbitration does not exonerate the credit provider from penalty; it merely removes the substance of the case out of the judicial field and into the administrative process.
How many consumers are up to the task to do their own litigation work? This is a long and tedious process whereby the ability of the consumers to quickly learn credit law is pitted against a large corporation with a staff of lawyers. Not surprising, few consumers take on this challenge.
There are several courses of actions available to the consumer at this point. First and foremost, lodge a grievance with the Attorney General. The Attorney General in Oregon, John Kroger, and his office cannot represent individuals in the prosecution of credit providers. However, if enough consumers are reporting a similar issue with the credit provider, the Attorney General has the power to investigate and penalize the credit provider. What you provide the Attorney General may be the catalyst for stopping unscrupulous business practices for the next person.
Challenging the documentation recorded against your credit history levels the playing field between you and the credit provider, but there are pitfalls. When a dispute is lodged with a credit bureau, it automatically advises the other two reporting bureaus of your challenge. The credit bureau will also ask the credit provider to respond. Generally, the time limit for such response is so short, that depending on the value in dispute, the credit provider may not respond. In that case, the negative report is deleted from your credit history. Where the credit provider does respond, those details are entered in addition to the original entry. In this instance, for example, should the credit provider respond, the additional entry might include a comment similar to “Debtor failed to pay minimum charge within 30 days; lodged a dispute concerning creditor failing to post payment.” This stays on the credit report for seven years, and future applications for credit will require additional information on this entry. This works to the benefit of the consumer, whereby they finally begin to get some leverage on their credit score and the ability to respond to otherwise unknown, negative reports.
This is one area where the credit providers are failing miserably- word of mouth. The ability of the consumer to be outspoken and communicate their grievances is something the credit companies have yet to find a way around. With the tightening of credit lending, these companies are always looking for new customers. While I can’t fault the work done by the chain store, I won’t be returning, and once paid off, I also won’t be using their credit line anymore. This favors the consumer in the long run because they obtain a better credit score and history by holding credit longer. This works against the credit provider because they earn no revenue for card usage, while still being obligated to report on the open line of credit. The longer a consumer holds a steady line of credit, the better their credit score, and the lower the interest rates on future credit applications.
The real loser in all of this is the business that offered the original line of credit. Customers who take their business elsewhere based on the credit provider, discipline the business that initially offered the line of credit. It is not the fault of the service provider that a customer relocates their business. The customer could have paid cash, said no to the credit card offer, and a myriad of other options. But the customer who commits to a credit agreement with a service provider, expects the same level of integrity as the credit provider expects in timely payments.
And at no time when the consumer has made timely payments, does the credit provider’s service ever outrank the consumers payments.