Oh, How Sneaky: You're Expected To Pay For Your Stuff (Or They Could Take Your Stuff From You)
There are a lot of sneaky, nasty provisions in those pages and pages of contracts we sign (like that iTunes agreement I can't be bothered to read), but this -- from a David Lazarus column in the LA Times -- isn't one of them.
Oh, the horror. You buy stuff, don't pay for it, and won't be allowed to keep it.
Lazarus:
Like most of us, Larry Maizlish seldom scrutinizes the pages of fine print that accompany his credit cards. The other day, however, he decided to give it a go for his Lexus Pursuits Visa card, which offers points for vehicle repairs."I had the time," Maizlish, 53, told me. "My eyes were feeling good."
That was fortunate because he had to dig deep to come across a nasty little stink bomb planted by the card's issuer, Comenity Capital Bank.
About halfway through the pages of legalese, after the usual boilerplate about Comenity being able to change the terms of the contract any time it pleases, so there, Maizlish found this:
"You grant us a security interest in all goods you purchase through the use of the account, now or at any time in the future and in all ... proceeds of such goods."
That's a fancy way of saying that Comenity reserves the right to send guys to your home and take any stuff you've purchased with your card if you don't pay your bills.
Lazarus calls it "The Sopranos Clause."
Heh.
I call it a company trying to make good on bad debt.
Not that companies are likely to do this.
"That doesn't mean the store or bank is actually going to do it," said Douglas Crowder, a Los Angeles lawyer specializing in consumer debt issues. "It's all about the threat factor."They'd really send repo guys to a cardholder's home?
"If it was a large enough purchase, it might be worth their while," Crowder replied. "For anything with a resale value of less than $2,000, say, it's hard to imagine they'd go to the trouble and expense."
A Comenity spokesman, Larry Meltzer, declined to address whether the bank would dispatch repo men to cardholders' homes.
Uh, for "the threat factor" to work, people would actually have to read those agreements, and most -- I would bet -- do not.
I used to work with a collections department in a large bank. They contested bankruptcy trial claims all the time by pointing to purchases made using hte bank's credit card and demanding a return of the merchandise. Judges often agreed to this demand.
Bankruptcy lawyers regularly advised clients to leave that bank's cards off the proceedings.
By contesting the claims, the bank was able to recover merchandise and reduce their bad loan losses (a credit card is a loan) - and thus give paying customers a better credit card rate.
Conan the Grammarian at April 18, 2016 6:48 AM
Exactly.
I don't see the problem.
It's not like they can come into my house and take my pillowcases. Why not? Because I pay my credit card in full every month, as if it's a debit card.
Amy Alkon at April 18, 2016 7:04 AM
The threat is ment to be a local one. Pay your bills or we take your stuff. But you can't just make that threat to the people after they stop paying their bills. So you make it to everyone, in writing, but hidden. Pull it out only as needed.
But like both of you I see little issue with making that threat. Don't want your stuff taken then pay your bill. Assuming that legally ends the security interest. I do have an issue with them claiming a security interest on something you paid off years ago.
Ben at April 18, 2016 9:03 AM
"By contesting the claims, the bank was able to recover merchandise and reduce their bad loan losses."
I'm actually surprised that they were able to get meaningful recovery. It's always been my sense that most people use credit cards either to purchase goods that have little resale value (e.g. clothes), or things that are consumed at the time of purchase (food/drink/entertainment).
Cousin Dave at April 19, 2016 7:49 AM
Many people, knowing they're about to declare bankruptcy, make those big ticket purchases in the hopes of having them written off.
Conan the Grammarian at April 19, 2016 5:37 PM
"Many people, knowing they're about to declare bankruptcy, make those big ticket purchases in the hopes of having them written off."
Ah, I see. In that case, the bank's strategy makes complete sense.
Cousin Dave at April 20, 2016 9:32 AM
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