Probably few of you know that before I went after abusive government agencies, I used to go after abusive financial companies — my first federal lawsuit was against a collection agency who called non-stop about a bill that I didn’t owe. It’s actually shockingly simple to sue a collection agency since there are pages upon pages of rules they have to follow, and it’s way cheaper for them to deal with the occasional lawsuit than to follow the rules.
I had a credit card with Citi that I was paying off over time until a few months ago, when my automatic payment didn’t go through. No problem, just send another payment, maybe pay a $30 late fee, whatever, right? Of course not. Because of the missed payment, Citi tells me that I now owe them a “penalty APR” of 29.99%, which can’t be reduced even after making up the payment.
Let me put this in perspective for you. Let’s say you owe $5,000. A typical credit card company will ask you to pay, give or take, 3% of your balance or $25, whichever is greater, per month. This would result in a monthly payment of $150. However, in that month, you will have accrued $124.96 in interest, meaning that after paying your $150, your balance owed will go down by only $25.04. Your debt will take you over 6 years to pay and over those 6 years you’ll have paid about $5,800 in interest — more than the amount you borrowed!
This is what is referred to as an “unconscionable contract term” — a part of a contract that is so absurd that no judge will enforce it. And, in fact, some judges have chosen not to enfoce Citi’s usurious interest rates. This common-law concept comes paired with the fact that contracts are supposed to represent a negotiation between the two parties that are signing the contract — but fat chance you can negotiate your credit card terms of service, and so judges therefore must be ever vigilant against the large companies taking advantage of the little guys.
So when Citi collection reps call me and tell me, “Well you agreed to the penalty APR when you signed your cardmember agreement, didn’t you?” I explain the unenforcability of this agreement to them until they get frustrated with me and hang up. I’ve offered them the money in exchange for returning my interest rate back to where it belongs, and they’ve declined. So now I offer them this: come after me for the debt in court, and let’s see what kind of precident we can create regarding unconscionable contract terms and credit card interest rates.
I won’t be taken advantage of by a bank, and I urge you not to be taken advantage of as well. The best way is to never borrow money, but for must of us it’s too late for that, so the next best is to know your rights and refuse to bend over.
[Author Note: Trying something new with the title here. Often times, people tweet my blog entries, and I’m hoping by putting the @Citi that Citi will be bombarded with copies of this post. If you’d like to participate in my experiment, share this on Twitter!]
Professional Troublemaker ® 
Those penalty rates aren’t really about collecting that kind of interest, they are about chasing you away as a customer if you’re not going to pay your bills.
Actually I think they’re really about making you *permanently* a customer — you end up with a bill that you keep paying, forever.
E X A C T L Y .
(Loren, if a potential customer doesn’t know all the rules of contract law they won’t be chased away)
Don’t forget about the adhesion-element, since the customer has no opportunity to negotiate the contract.
Normally customers ARE able to be searched as a condition of entry into a private establishment, like a plane, but this is a contract of adhesion, as well as unscionable bargaining-power– as well as collusion with the federal government as a PARTY OF INTEREST as well as a judge, since they are doing the searches.
Currently, passengers are being denied their 4th Amendment rights, on the basis that they voluntarily “waive” this protection when they choose to board airplanes– which the government claims is not a right, since the planes are privately owned. This was decided in US v Davis (482 F2d 910), where the court ruled as follows:
“A person has the choice, as a matter of constitutional law, to submit to a search of her person and carry-on baggage, as a condition to boarding an airplane, or to leave. The passenger’s choice can be seen as either a decision to give up the right to leave or a decision to submit to the search. Either way, the choice is seen as a “consent,” granting the government a license to do what it would otherwise be barred from doing by the Fourth Amendment. This consent must be voluntary.”
However this consent cannot be voluntary for airline-passengers, since it is coerced by the simple fact that ground-transportation is much slower than air-travel, and so this amounts to a constructive violation of the 5th Amendment via interfering with the person’s freedom of movement. As such, air-travel is not a “choice,” so much as a necessity in modern life when traveling any considerable distance.
Likewise, consent cannot be alleged to be “voluntary” on the grounds that it is made via private contract with the airline; for all commercial airlines and airports impose these conditions on passengers, under TSA regulations. And therefore the contractual requirement that the passenger consent to a search as an a priori condition of boarding the airline’s plane, creates a “contract of adhesion“ (i.e. one in which the party had no opportunity to negotiate the terms of the contract). For indeed this search-requirement is a) non-negotiated, as well as b) unconscionable in terms of superior bargaining-power of the airline, while air-travel is also c) a relative necessity in modern life and business, while finally d) the consumer has no alternative via other airlines, if all airlines impose this rule. Rather, such terms are defined as “boilerplate language,” and cannot be enforced against a consumer. Rather, such “contracts of adhesion” are considered unenforceable under modern contract-law. Therefore, airlines and the federal government cannot circumvent 4th Amendment protections on this basis.
But that’s EXACTLY what they’re doing; and we MUST appeal this issue to the US Supreme Court on that basis.
American Jurisprudence know this as well, yet it fails to provide a genuine remedy for the commercial air traveler. The legal system is corrupt and subjugated.
If anyone is going to appeal to the SCOTUS, they better expedite the Appeal because the criminal-TSA is going to eventually appeal to the SCOTUS for the right to carry weapons.
Excellent article! The Credit Card companies (and the Banks) are as corrupt as the Federal Reserve. They entrap people into fraudulent debt by giving no genuine legal-notice except ambiguous fine-print which no one can understand.
citibank is owned by the same people who own the TSA. big brother the (government). I never thought in my lifetime the american government would regress in civil rights and start to xray and molest it’s citzens to get on a bus with wings (and seize your apple juice too) nor did I think big brother would own car companies ,banks and other to big to fail semi monoplies.we are becoming like eastern urope circa 1960.