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Was your interest rate raised?

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I got this note from one of my friends and thought I would share. It may or may not help but I am researching for myself now.

***from my friend***

I was doing some research earlier today on Ohio and Michigan law re: xxxx, and i came across something that might help you, i briefly checked the Arizona statutes and i think (but I'm not sure) this might work for you.

Check your credit card statements to see if they RAISED your interest rate at any time WITHOUT your signature. If they did, it may violate the Arizona interest statute (which is very similar to Ohio's). Now, Arizona has a usury statute that's similar Michigan's which provides that if the interest rate charged exceeds what is allowed by law, the creditor forfeits ALL interest and must credit the amounts you have paid as interest towards payment of principal. (I'm admitted to practice in OH and MI.)

Before i go to the trouble of attempting to determine if this will work under Arizona law (which is a little time consuming, even using Westlaw), check and see if they upped your interest rate (as they typically do when there is a default). If so, let me know what the original rate was and what they raised it to. Btw, the problem researching this area of law is that most states have exceptions to the general interest and usury statutes that are sprinkled through the state code, some of which can be hard to find unless you actually know they are there.

The argument goes something like this: The statute says that the max interest rate is X "unless otherwise agreed in writing." Typically the credit card app you sign provides for more than X which is lawful. But if it says that upon default the interest rate rate will increase to the max provided by law, that max is either the amount you initially agreed to, or X, since you did not agree in writing to a rate greater than one of those, X being the max provided by law in the absence of a written agreement providing for a different amount and the original rate being the only specified different amount that was agreed to. So, if they increase to a rate greater than the initial rate upon default that is also greater than X, it would be usurious. As i read the AR usury statute, this operates to forfeit their right to collect ANY interest and all amounts previously paid towards interest must be applied to principal. i don't know if this will work for credit card accounts, but it's worth checking out, especially if the collection lawyer is stupid (as many retail collection lawyers are--which is why they are handling retail collections instead of something more interesting and better paying).

Edited by malinrott
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The problem though is that most credit card issuing banks are National Banks and due to a federal court decision (cannot look it up right now), are exempt from the usury laws of the individual state and only have to follow the usury laws of the states they are based in (which is why most are based in South Dakota or Delaware, both states do not have usury laws).

If you tried to pull this, the bank would most certainly bring in the Office of the Comptroller of Currency to stop it (talk about your government working against you).

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