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Credit Cards

Although the Federal Reserve Board reduced interest rates many times in recent years, many credit card holders are surprised to find that the interest rate on their credit cards has not gone down correspondingly. In early 2003, the average interest rate on credit cards was a still high 14.5%. The reason for this is simple. Although credit cards have variable rates that you would think would rise or fall with other interest rates, the truth is that in the fine print of your credit card agreement is a floor below which the interest rate will not fall and, not surprisingly, this floor rate is quite high, as reflected by the average interest rate of 14.5% in 2003 when this book was written.

Judy Thomas was awarded more than $5 million by a Federal Court jury in Portland, Oregon, in a lawsuit she brought against Trans Union, one of the three major national credit reporting agencies (Judy Thomas v. Trans Union LLC). In 1996, Ms. Thomas first found listings of bad debts mistakenly included on her credit report. The debts were, in fact, those of a woman named Judith Upton. Similar first names, the same birth year and social security numbers that differed by only a single digit probably contributed to the mistaken inclusion of these debts on Ms. Thomas’ credit report. After being informed of the mistakes by Ms. Thomas, Trans Union, the jury determined, failed to properly investigate and correct the matter, causing a three-month delay in the processing of a mortgage application of Ms. Thomas. Taking things into her own hands, Judy Thomas directly contacted the creditors listed by mistake in her credit report and through them fixed the credit report. A sympathetic jury awarded Judy Thomas $300,000 in compensatory damages and then added $5 million in punitive damages to make their point. A less sympathetic appeals court later reduced the amount of the punitive damage award to a still significant $1 million.



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