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Author: akck Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308230  
Subject: CC Reform and Chase Date: 4/8/2010 5:31 PM
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I thought CC companies were required to warn you before making changes to your account. I was checking on my wife's Chase card and they dropped the credit limit by 97.3% from last month. So far, no notice of that occurring other than online. We automatically charge the cell phone bill against it and pay it off each month just to keep it active, so it's a money loser to them. Oh well, looks like we'll be letting that card go idle since there's no point to keep it active. We might make some small nuisance charges on it and pay it off quickly just to annoy them.
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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296861 of 308230
Subject: Re: CC Reform and Chase Date: 4/8/2010 6:19 PM
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akck,

You wrote, I thought CC companies were required to warn you before making changes to your account. I was checking on my wife's Chase card and they dropped the credit limit by 97.3% from last month. So far, no notice of that occurring other than online. We automatically charge the cell phone bill against it and pay it off each month just to keep it active, so it's a money loser to them. Oh well, looks like we'll be letting that card go idle since there's no point to keep it active. We might make some small nuisance charges on it and pay it off quickly just to annoy them.

Sorry, but banks have never been required to tell you when they're cutting your credit lines or closing an account. The CARD Act didn't change that.

That ability to stop doing business with you is a defensive feature of your contract that allows the bank to limit it's exposure to an account or card holder it deems risky. You have essentially a reciprocal capacity to close the account without notice.

From what you posted, your wife may not seem profitable to them. Rather than try to encourage new business they've likely given up on her. They've cut her credit line to just the absolute minimum she needs historically - likely in the hopes she'll close the account by herself. Either that or they've seen other worrying activity on her credit report and have cut her credit line as a defensive move to prevent her from moving any outstanding balances to this account.

BTW, what did they change the credit line to? $500?

- Joel

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Author: akck Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296863 of 308230
Subject: Re: CC Reform and Chase Date: 4/8/2010 7:39 PM
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Joel,

Nothing risky done on her part. We paid off a 0% balance last year and just cycled our cell phone bill through it each month to keep it active. Her credit rating is even better than mine and mine isn't bad. They dropped it to $800. She never wanted the high limit they initially gave her, but once she got it, I figured not to mess with it because of utilization while we had the 0% balance.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296865 of 308230
Subject: Re: CC Reform and Chase Date: 4/8/2010 8:31 PM
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Nothing risky done on her part. We paid off a 0% balance last year and just cycled our cell phone bill through it each month to keep it active. Her credit rating is even better than mine and mine isn't bad. They dropped it to $800. She never wanted the high limit they initially gave her, but once she got it, I figured not to mess with it because of utilization while we had the 0% balance.

Well, if you've checked her credit reports to be sure nothing strange has shown up on them, then you can probably chalk it up to low usage of the credit line, which made her account costly for the lender to keep at that credit level, for the return that they were getting. Costs to the lender aren't just the costs to print statements each month or to process your payment each month - there is also the capital that they have to hold against the open line of credit. Capital is a scarce resource for banks, so they are looking to deploy the capital that they have in the most profitable way. The bank is required to hold some capital reserves against the possibility that she would actually go out and charge up to the limit on the credit card. Since your wife has demonstrated that she isn't going to use her credit to a significant level, the lender would rather use the capital backing her line of credit for someone who is actually going to utilize a higher portion of their credit limit.

AJ

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Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296877 of 308230
Subject: Re: CC Reform and Chase Date: 4/9/2010 12:41 PM
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akck,

You wrote, Nothing risky done on her part. We paid off a 0% balance last year and just cycled our cell phone bill through it each month to keep it active. Her credit rating is even better than mine and mine isn't bad. They dropped it to $800. She never wanted the high limit they initially gave her, but once she got it, I figured not to mess with it because of utilization while we had the 0% balance.

Under the Fair Credit Reporting Act (FCRA), this is considered an "adverse action". Since this just happened, the notice may be in the mail; but the bank is effectively required by the FCRA to provide your wife with an explanation.

The FCRA only explicitly requires a lender to explain an "adverse action" based on information obtained wholly or in part from a credit report. However given this is an adverse action on a credit account, any reasonable person would assume it is based at least in part on the contents of credit report. Therefore, the lender is effectively obligated (ie, your wife could sued for damages if they refused) to tell your wife the reason for the change in her credit line.

More than likely the lender will say the reduction was based on a review of the account and/or internal business reasons. But if they admit it was based on a credit report, your wife can use the notice to pull one for free that doesn't count toward her annual freebie.

- Joel

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Author: akck Big red star, 1000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296898 of 308230
Subject: Re: CC Reform and Chase Date: 4/12/2010 5:22 PM
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Well, if you've checked her credit reports to be sure nothing strange has shown up on them, then you can probably chalk it up to low usage of the credit line, which made her account costly for the lender to keep at that credit level, for the return that they were getting.

aj,

You called it correctly. We just got a letter saying they adjusted it due to usage patterns. It's close to a rewards point, so I think we'll let the cell bill hit it for a couple of months, select the cash award and then stop using it. Is it better that she cancels it or let Chase cancel it in the future since it will be languishing from non-use?

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 296902 of 308230
Subject: Re: CC Reform and Chase Date: 4/13/2010 12:35 AM
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Is it better that she cancels it or let Chase cancel it in the future since it will be languishing from non-use?

It doesn't matter at this point. It used to be better to have an account 'closed by consumer' but the credit scoring models have changed to ignore who closes the account - you or the lender.

Personally, I would close the account myself anyway, just so I knew when it was being closed.

AJ

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