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The next time you get your credit card statement, take a close look it and you might uncover there is more than meets the eye.? The state of Hawai'i is looking to bring to light some of the practices by credit card companies.? Last week, the state filed seven lawsuits against credit card companies and banks claiming their charges for payment protection programs are unneeded, unwanted, and unnecessary.
The term focused on in the lawsuits is called "slamming" and the state claims they have over 35,000 people affected by the practice that they say is widespread and long lasting. Slamming is the process of companies getting people to sign up for products or services they did not agree to or qualify for.
It is alleged that credit card companies have made millions through slamming, with an average of $150 charged per cardholder unknowingly.? Of the banks and credit card companies being charged are Bank of America, Capital One, Barclays, Chase, Citi, Discover, and HSBC.? The state is also asking for a stop slamming, as they allege is illegal.? Of the 35,000 people, hired Honolulu attorney Rick Fried alleges 110,000 credit cards - 4 percent of cards in the state - come with this charge.
Will This Affect Credit Card Issuers?
During the recent economic crisis, banks have been the blunt of many attacks, most justifiably so.? This one is no different.? With losses for banks increasing, it is no shock they have turned to price increases for their products.? Of which, this not being any different.? This time however, it's not as simply as a fee bump because slamming is claimed as deceitful.? If banks lose this case, chances are they'll simply update credit card statements and will stop participating in hard sells of unneeded products.
Also, should the banks and credit card companies lose this case, one could expect a price increase in the annual fee for cards that would incorporate these charges into that amount knowingly.
What happens if banks win?? Business as usual, we can assume.? However, should this case go national, there is potential for banks and credit card companies to put together a more concerted effort for transparency in their charges.? Chances are you'll see a settlement before this goes to trial.
Will This Affect YOU?
While each individual may only be hit for $150 unknowingly, multiply that by hundreds of thousands in the State of Hawai'i alone and you can see how large this case can become on the macro level.? This isn't a class action lawsuit though, so don't expect anything going back into your pockets directly.
For future card holders, this should stress the need to do your research before applying for a credit card.? Credit card companies throw a lot of information, most of it unnecessary when attempting to sell you on one of their cards.? Thus,? it is very important to do your homework and sift through all of the propaganda while searching out which card is right for you.
Going forward, this could lead to rising interest rates on cards and higher annual fees, but potentially more transparency.? As always, make sure you are aware of what you are getting into before you apply and use a credit card.