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February 17, 2020

Surprise: Stuff You Buy With Your Credit Card Could Be Repossessed!

Filed under: Finance — Edgar (aka MrConsumer) @ 6:10 am

MrConsumer recently applied for a new credit card and was shocked to see a particular clause in the credit card agreement. [See identical clause from a different credit union.] It said the credit union was taking a security interest in any goods I purchased with the card.

*MOUSE PRINT:

security interest

That means if I don’t pay my credit card bill, they could theoretically come to my house and repossess that big screen TV set I might have bought to watch the Super Bowl, or deduct the delinquent part of my unpaid balance from any savings accounts I have at the credit union.

We normally think of a security interest arising when taking out a mortgage on a house or buying a new car, but not when buying a refrigerator. Nonetheless, if your credit card issuer tucked a security interest clause in your credit card agreement, and depending on the wording they used, they could repossess that still unpaid for big-ticket item.

They will have to follow state law, which might impose restrictions such as the security interest does not apply to items under $200, or they can’t disturb the peace in the repossession process, or they have to get a court order first, etc. See some rules that apply in New York State, for example.

We’ve reported on various unexpected and sometimes funny clauses that have been secretly tucked into various contracts (see, for example, story one, story two), but this one raises potentially serious issues for those who fall behind in their credit card payments.

Does your credit issuer use one of these security interest clauses? To check, see if the Consumer Financial Protection Bureau has your bank’s credit card disclosure form in their database.

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3 Comments

  1. It seems that we have arrived at the point in our US society where many, if not most, big companies want to screw us consumers.

    Comment by HMC — February 17, 2020 @ 6:10 pm
  2. This is a perfect example as to why you shouldn’t buy something you really can’t afford? I personally do NOT buy anything I can’t pay cash for! Credit cards are fine I suppose for certain things; establishing credit (pay off bill EVERY MONTH), etc. But mostly they are a way to pull people into a dark hole that is almost impossible to get out of!

    Comment by Gert — February 17, 2020 @ 7:13 pm
  3. In Alabama (and I predict everywhere else) the security interest in specific goods will fail if there have been the purchases on the card so that it cannot be ascertained the balance on THAT PARTICULAR item.

    Comment by Mark H. Friedman — February 17, 2020 @ 10:51 pm

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