I was reading this article over at the Consumerist about Citicard ending Universal Default on it's card. Universal Default became a part of many card holder agreements a few years back. In a nutshell, Universal Default allows any credit issuer to adjust your interest rate to the default rate (usually around 26, 29, or 32% apr) if you have gotten behind with an unrelated bill. Miss a house payment? Universal Default allows Citi - and any other creditor - to jack your interest rate. Late on the water bill? Jacked. Overdue library fees. Jacked. Didn't pay that parking ticket that blew off of your car? Jacked. Under Universal Default, creditors could treat you like a deadbeat for simply taking on, in their eyes, too much debt. Even if the late payment is due to an error on the part of one creditor, the others who jacked your rates are under no obligation to return them to where they were - even after the matter is cleared up with the original creditor! This practice was so bad that it was finally struck down by Congress during some hearings last year. And by 'struck down', I mean that Congress gave the industry a good, hearty "shame on you". Since then, Citi has agreed to stop using Universal Default. Here is a quote from the Consumerist article - we'll discuss it on the other side.

She said she was personally appalled after finding out that her company had the policy in the first place, but then struggled with how to tell customers about it, because, she said, "It's like telling people you stopped beating your wife."

Wow. That's quite a statement and likely the closest thing to an admission of of guilt that you'll see out of a credit card company. The comments were quite interesting too.

But really, lets continue with the 'wife-beating' analogy. It's likely no secret that the abuse is happening. Your friends and neighbors know, but it is still a bit too taboo to talk about. The physical abuse comes and goes - some incidents are worse than others and nothing you say or do will make it stop. Sometimes the relationship is good. Flowers, dinner out, a nice vacation. You want to believe he's changed, but deep inside, you know that you are setting yourself up for a downfall. The mental abuse is the worst part. That time you 'took a break' and went to your sister's house for a week was hell. He called constantly. Sometimes you'd pick up, and he didn't seem so bad. But then suddenly he's yelling at you and calling you a names. Still, he was your first, and you couldn't bare to leave him, could you? Think of how this will affect your reputation. He wouldn't go around bad mouthing you and calling you a whore, would he?

***Disclaimer*** This analogy is in no way intended to downplay or make light of the seriousness of spousal abuse. It is a terrible thing that affects far too many people.

Maybe this sounds familiar, despite never being a victim of spousal abuse. Sounds like a relationship with a credit card, doesn't it? So long as you walk on eggshells and play their game, there are no problems. Then you miss a payment. The abuse begins. It's small a first, and you brush it off. "Maybe I deserve it", you think. Then things start to happen for no reason. Suddenly your interest rates go from a 'reasonable' 4.99% to 31.99%. They want to make things work, but it seems like every time you come to a compromise, they forget about it and it's like it never happened. You may get completely cross-ways with them and they send your file to collections. Then the real abuse starts. Yelling, name-calling, calling your family members to 'get a message to you'. They may even make good on their threats and ding your credit, which will follow you around and affect future relationships.

Abusive creditors are like abusive spouses. They won't change, and the only way to end it is to leave for good. If you don't enable the abuse, then it can't happen. Sorry, Citi, but it's your analogy - you opened the door, and we walked right in.

Have you ever taken a financial beating? Abused by a creditor? Taken advantage of by someone who knew you weren't ready? Screwed over despite your best, honest efforts to be a good consumer?

What happened? How did it make you feel? What steps have you taken to make sure that this never happens again?

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