Retailers usually offer various sales and promotions during the holiday shopping season. And you might need financing to take advantage of these offers. Vendors can then tout the benefits of their store cards as an answer to your financing needs. But what if they sign you up for a store card without your knowledge?
For example, reader Karen writes, “Hi, I recently purchased a placemat from Ashley. I was told I could make payments based on my credit rating, so the lady checked to see if I would be approved for the monthly payment option. Today I received a credit card. I did not activate the card because I was never told I was applying for a credit card. My credit score is 747. It’s down 5 points; it was 752. I’m thinking of canceling the account as I don’t shop at this store and won’t use the credit card. There is no fee, high interest rate and I can only use it for this furniture store. The card has a credit of $3,000 (limit). However, I need advice on what to do.
The pitfalls of private cards
It seems to have become standard operating procedure for sellers to present their store cards when checking out. They will try to entice you with offers of big discounts and rewards when you use the card. They’ll say you can get a big discount on a purchase you’re about to make anyway. These may be the pros, but these cards also have their cons.
A big downside to these cards is that they provide limited access to purchases. As a general rule, they can only be used in the named store or its affiliates. And their interest rates tend to be higher than other types of credit cards.
They might offer you a “deferred interest” promotion, which means that you won’t have to pay interest on your balance for the duration of this promotion. However, if you haven’t paid your full balance by the end of the promotion period, you will be in for a shock.
At that time, you will be charged interest retrospectively on the remaining balance, going back to the time of purchase. Essentially, interest will be deferred, but it may be charged if you keep a balance after the promotional period ends.
Truth in Lending Act Protections
A retail store, or any card issuer, cannot issue you a card without your express permission under the Truth in Lending Act. Issuers can only approve you for a card if you have made an oral or written request or filed a card application. They may also issue you a card without your express permission when it comes time to renew your current card or if you need a replacement for an existing card.
There have been instances where the Consumer Financial Protection Bureau has received complaints from consumers saying they received store cards in the mail even though they declined offers to open these accounts at the store or over the phone. .
This can happen if you share personal information, including your social security number, with store personnel. They could have gotten this input from you under some pretense and then used it to endorse you for the card without your knowledge. This type of misuse of information is considered fraud.
Contain the damage
If you don’t want to keep the card, you must call the issuer and ask for it to be cancelled. And you should follow up with credit reporting agencies to make sure the account is not on your file. The three major agencies – Equifax, Experian and TransUnion – are offering consumers free credit reports once a week until April 2022. And you are entitled by law to at least one free credit report from each of the three major bureaus. per year.
If there is still a record of the unauthorized account on your credit file after you request it to be canceled, you should file a dispute about it with the credit bureaus saying that you did not authorize the account. And also tell the card issuer to stop reporting the account to the credit bureaus.
The bottom line
Karen, the store shouldn’t have issued you a card without your express permission. Store staff likely used all of the information you provided without specifically informing you that you were requesting a store card. And the store’s thorough investigation of your credit situation likely caused your credit score to drop.
You must call the card issuer and tell them to cancel the card. And then check your credit report after an appropriate interval to make sure the account is off report. If there is a problem, you can follow up by filing a dispute with the credit reporting agencies. You could even file a complaint with the CFPB. I hope this issue will be resolved to your satisfaction!
Contact me at [email protected] with your credit card questions.