Discover Card Predatory Lending, Unconscionable Practices, Continuous Interest Rate Increases and Exploitation
NATIONWIDE -- Discover Card engages in unconscionable behavior and exploits their cardholders through predatory lending practices. My interest rate on my Discover Platinum card was 12.74% as of the April 19, 2005 statement and is now 27.99% as of my March 19, 2006 statement. My account has seen a monthly "just noticeable difference" interest rate increase of .25% to .75% per month from April 2005 to December 2005. My interest rate jumped almost 10% from 16.49% to 25.99% in the month of December 2005 and is currently at 27.49% as of the March 19, 2006 billing. Since December 2005, Discover keeps increasing my interest rate each month in small steps of .25%-.50%.
I encountered a problem with Chase Bank not utilizing my overdraft line of credit and thus my bank account over drafted and the balance went negative as non-sufficient fees compounded on the account. It took me almost 4 weeks to resolve this matter with Chase. Chase eventually took responsibility for their error and reversed almost $1,000 in NSF fees on the account. Because of Chase's error, my November 2005 Discover Card payment was returned to Discover Card towards the beginning of December as NSF and Discover Card increased my interest rate from 16.74% to 25.99%.
Chase Bank provided a letter to me and the letter stated and acknowledged their error. I forwarded the letter to Discover Card and they will not reduce my interest rate because their justification is "I have been over my credit limit within the last 12 months". I would not had been over my credit limit had Chase initially paid the November 2005 payment as they should have done. Discover Card also compounded the damage and caused my account to go over the limit by assessing me late fees, over limit fees and return item fees along with continually increasing my interest rate.
They also continued to approve charges while the account was over the assigned credit limit and now they are trying to exploit me with unconscionable interest rate increases and do not want to work with me and restore the account to the point it would have been had Chase paid my November 2005 payment and not returned it. I have tried to speak with Discover Card and they do not wish to help me and continue to revert to the cardholder agreement "which clearly states they cab change the terms at any time". I have proven beyond reasonable doubt to Discover Card that Chase made a mistake and that Chase has taken full responsibility for the error. Discover will not budge in my favor and they continue to exploit me with exorbitant interest rates and interest rate increases, higher payments and over the limit fees.
Discover Card keeps reverting to the cardholder agreement as their justification for my interest rate hikes yet Discover Card and Chase bank have gotten me where I am today with this account. Chase accepted responsibility for their mistake. Discover Card will not make amends to my account because Discover would rather profit from my misfortune with Chase Bank and Discover also told me the ultimate responsibility falls on me to ensure payments are made on time. Discover will not accept Chase's letter but instead want to use this as an opportunity to profit in the short term and loose a customer in the long term.
The cardholder agreement is a cohesion contract and I am the weaker party because I do not have any bargaining power. Discover is using this to their advantage to engage in predatory and unconscionable lending practices and exploit their cardholders and rake up millions of dollars in additional income. The cardholder agreement , because of the binder arbitration agreement which gives Dsicover Card free rein to exploit their cardholders and nor be held accountable because the cardholder has no recourse and cannot revert to the court system to hold Discover Card accountable for their abuses, is a non-negotiable cohesion contract where the cardholder has no power or recourse and Discover Card has the power to amend it at anytime in their favor and as often as they want too.
The cardholder is exploited and has to either accept the amendment or close the account if they do not wish to accept the new term(s). Discover Card skims more money from the cardholders , in small amounts from the mass population, as a result of changing the cardholder agreement and sneaking in small monthly interest rate increases in hopes the cardholder does not notice them. I advise everyone to watch their interest rate monthly on their account and don't become victim to their practices.
It is ironic how David Nelms, Chief Executive Officer, came to Discover Card in 2005 and all these predatory lending practices seem to be increasing and occurring since his assignment to Chief Executive Officer. David's prior employment was with MBNA. MBNA had several class action lawsuits brought against them for predatory lending and fraud during David's tenure and now Discover Card is engaging in these practices. Coincidence here? It sure seems to me that the top leadership has brought his MBNA business tactics to Discover Card and implemented them to exploit their cardholders and generate millions in income.
There was a case in California, as follows, that illustrates Discover Card's attempted use of the Arbitration Agreement, and the court upheld the agreement as unconscionable.
If you are a Discover Card account holder and have experienced more than one interest rate increase within the last year even though your credit has not changed and Discover Card has used predatory tactics with you and you would like to be a member and/or participate in a class action lawsuit, contact me via email.
A class action lawsuit is also being considered to challenge the credit card industry's "BMA- Binding Mandatory Arbitration" clauses.Discover Card implemented the BMA back in 2001 and several other big credit card companies followed suit. The Arbitration clause disallows class action lawsuits and court action by cardholders and further encourages Discover Card to use their power to commit fraud and engage in predatory lending and not be held accountable by the courts for their actions.
My recommendations are :
1) Get rid of your Discover Card account and do not do business with any credit card company which uses "BMA". The companies that utilize arbitration are the ones who setout to exploit the consumer and don't want to be held accountable by the courts for their unconscionable and predatory actions. The following credit card companies have and use binding mandatory arbitration - Bank of America, Discover Card, JPMorgan Chase, Washington Mutual, Chevy Chase, MBNA, Wells Fargo, Household Financial, Beneficial, Orchard Bank and Providian so steer away from them because they will exploit you and take your money. Only do business with credit card companies who do not dictate terms and make you use arbitration or have binding mandatory arbitration. Credit Unions are your best defense against the credit card industry and arbitration clauses as most credit unions don't use arbitration because they are not out to steal people's money.
The best thing we all can do to the "credit card loan sharks" is take our credit business to a credit union and get one of their Visa's. I checked out the credit unions in my area and the rates are 8%-15%, no Late fees until 10 days after the payment due date, 9.9% fixed APR on balance transfers until they are paid off and no over limit fees. Most of the credit union websites I checked out had fixed rate credit cards so you know what your rate will be and don't have to worry about them pulling the "interest rate increase tricks" and escalating your interest rate because you are now "a greater risk" or just changing the rate at their leisure to generate more income.
IF you do fall prey to Discover Card or any other credit card company and they change your terms and/or exploit you, notify the following and file a complaint or share your story:
1) ABC Television Network
2) NBC Television Network
3) Federal Deposit Insurance Corporation - FDIC (Regulatory and enforcement arm of the banking industry)
4) Office of Comptroller of the Currency
5) CBS Television Network
6) Fox News
7) Your State's Attorney General Office
8) Your state senator(s)
9) MSNBC Television
10)Cable News Network - CNN
11)Wall Street Journal
12)Securities and Exchange Commission
Discover Card Bar on Class Action Arbitrations Upheld
By ROBERT GREENE, Associate Editor
A Discover Card user agreement that expressly bars class action arbitrations was upheld yesterday by this district's Court of Appeal, setting up a conflict with a ruling last year from the Fourth District.
In Christopher Boehr's case against Discover, this district's Div. One ruled that the Federal Arbitration Act preempts provisions of the California Unfair Practices Act and other California law that makes the class action waiver substantively unconscionable.
Sec. 2 of the FAA, a 1925 statute passed to reverse what this district has called ?longstanding judicial hostility to arbitration agreements,? mandates enforcement of arbitration agreements.
?While a state may prohibit the contractual waiver of statutory consumer remedies, including the right to seek relief in a class action, such protections fall by the wayside when the waiver is contained in a validly formed arbitration agreement governed by the FAA,? Justice Reuben A. Ortega wrote.
The clause that moved Boehr to sue Discover and seek class action status was added by notice to cardholders in July 1999. It eliminates access to court in the event of a claim by either Discover or the cardholder when either chooses arbitration.
It also bars either side from joining or consolidating actions in arbitration by or against other cardholders with respect to other accounts, or arbitrating any claim as a representative of a class or in a private attorney general capacity.
Boehr charged that Discover breached the cardholder agreement by imposing a late fee of $29 on payments that were received on the due date but after an undisclosed 1 p.m. ?cut-off time.?
The Fourth District Court of Appeal's Div. Three ruled last April that the same class action waiver clause takes a back seat to California's public policy.
?The clause is not only harsh and unfair to Discover customers who might be owed a relatively small sum of money, but it also serves as a disincentive for Discover to avoid the type of conduct that might lead to class action litigation in the first place,? Justice Eileen C. Moore wrote in Szetela v. Discover Bank.
Moore wrote that the provision violates fundamental notions of fairness and violates public policy ?by granting Discover a ?get out of jail free' card while compromising important consumer rights.?
It also violates public policy, Moore wrote, by working against judicial economy.
?To allow litigants to contract away the court's ability to use a procedural mechanism that benefits the court system as a whole is no more appropriate than contracting away the right to bring motions in limine, seek directed verdicts, or use other procedural devices that allow the court to operate in an efficient manner,? Moore said.
But Moore's opinion in Szetela did not deal with the federal preemption question. Ortega said that meant it was wrongly decided.
A threshold issue was whether to rely on Delaware or California law. Los Angeles Superior Court Judge Carolyn Kuhl said Szetela showed there was a difference between them because of California's unconscionability policy, and struck the class action waiver clause from the agreement since pursuing Delware law would violate a fundamental public policy here.
But Ortega said Boehr failed to adequately brief his stance that no arbitration agreement was formed. The issue being conceded, Ortega said, the court is left to look at a valid arbitration agreement which necessarily is governed by the FAA.
The case is Discover Bank v. Superior Court, B161305.