Most people whose wallets bulge even slightly with plastic take certain things for granted. They assume that payments to a credit-card company will be processed on time, that cards won't be lost or stolen, and that card numbers won't be fraudulently used. Only when something goes wrong do they discover how easily an unblemished credit record can be marred, and how diligent card holders must be in tracking errors.
My own credit-card innocence ended when a check for $26.24 was never credited. Not until the store called to say the account hadn't been paid for two months did we discover the complexities of correcting a mistake.
Resolving the problem took many telephone calls and two trips to the store. Even then, a credit representative explained that whenever an account is two months overdue, her department notifies a credit reporting agency. Calling this a "store error," she asked the agency to clear the record. Otherwise, she said, even after a delinquent account is paid, the default stays in a consumer's file for seven years.
Seven years! It's enough to send a person to the phone to request a credit profile from credit-reporting agencies, as financial experts recommend.
For other credit customers, trouble starts when their bill shows purchases they didn't make. Howard Strong, a lawyer in Reseda, Calif., who represents consumers in class-action suits against credit-card companies, tells of a middle-aged friend whose Visa bill included $5,000 for attending rock concerts, sending flowers to young women, and hiring limos. Someone had stolen his credit-card number and run up the charges by telephone. But when his friend contested the amount, Mr. Strong says, "He was told, 'You did it, you have to pay up.' "
Although the man sued and eventually won, Strong adds, "Typically, people don't know what to do, so they pay the bill."
In the late 1980s, Strong says, he encouraged people to sue credit-card companies when serious problems went unresolved. Today, he finds courts increasingly hostile to consumer suits. "There's now a concerted effort, in many technical ways, to knock down attorneys' fees in these cases, so lawyers are reluctant to take them," he says. "Often you're not awarded enough to compensate them for their time. It's a real way to keep cases out of court." He calls it a "tough situation for consumers."
As mailboxes across the nation fill daily with unsolicited, "pre-approved" applications for credit cards, indiscriminately targeting not only the credit-worthy but the debt-ridden, card companies' open-arms invitations have never been more enticing. But that friendly approach can turn decidedly frosty when accounts go awry for whatever reason.
Everyone has a favorite anecdote to illustrate what a never-never land the world of credit can become. One friend, wealthy in her own name through an inheritance, was recently unable to get an American Express gold card - presumably because she doesn't hold a paying job.
By contrast, our daughter, who earns a modest post-college salary and lives on a tight budget, easily qualified for an American Express gold card by filling out an application she picked up at the supermarket. She also received a "pre-approved" application for an Optima corporate gold card. To test the quirkiness of the credit-approval system, she wrote her cats' names on the line for "company name." ("They keep me company," she jokes.) Presto! Her gold card was in the mail.
It makes a funny story. And since she quickly cancelled both cards, perhaps the joke is on the card companies for offering her this supposedly elite form of credit. But not really. If the future bodes more deadbeats, it's also safe to say there will be more innocents presumed to be deadbeats by all the giant collection agencies. For the most part, the card companies are getting the last laugh - all the way to the bank - on the rest of us.