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Schumer Advises Mohawk ValleyChristmas Shoppers On How To Avoid Being Ripped Off This Season

As holiday shoppers enter stretch run, Schumer details new findings about sky-high rates on credit cards from retail stores, fees on debit cards, and unfair return policies

Senator also outlines specific steps to protect Mohawk Valley consumers this season, with stores and banks routinely luring shoppers with one-time discounts that may not be the bargains they seem

With holiday shopping in full swing, US Senator Charles Schumer today warned Mohawk Valley Christmas shoppers about retail policies that could cost them thousands of dollars in their holiday shopping. Schumer also released a survey showing that interest rates charged by store credit cards are significantly higher than those charged by bankissued cards and outlined plans to disclose unfair return policies and to keep consumers informed about sudden credit card rate hikes.

This is supposed to be a season of good will and holiday cheer but unfortunately if Mohawk Valley shoppers arent careful, they could get ripped off, Schumer said. It used to be when we heard someone sing, Youd Better Watch Out we were talking about Santa Claus coming to town but now with skyhigh credit card rates at most retail stores and other unfair policies, its more like a warning song for holiday shoppers far and wide.

In order to help shoppers avoid the traps of holiday shopping this season, Schumer warned Mohawk Valley shoppers about the following practices:

1) Misleadingly High Retail Credit Card Rates: Several retail stores in the Mohawk Valley try to lure consumers into buying their store credit cards by offering discounts by as much as 10 to 15 percent on the first purchase made with the card. However, those savings can quickly turn into a net loss if the customer does not pay off the credit card balance in full each month or makes a late payment, which results in an additional fee. Schumer revealed the results of a survey of Mohawk Valley retailers that showed the following results:

" Mohawk Valley area retail store credit cards come with an average interest rate of 21.19% and an average of $19 for late payments. The national average bank credit card interest rate is 12.75% with some credit cards offering rates as low as 9%. As a result, Mohawk Valley shoppers could save up to 15% on their purchases this holiday season if only they opt to use their bank issued credit card rather than the retail store. Retail credit card rates can even exceed the criminal usury rate of 25%. For example the Sears card can hike up to 27.15% and the Radio Shack card can hike up to 27.85% based on payment and credit history. Click here to view chart To save Mohawk Valley shoppers from these high rates, Schumer today called on the Federal Trade Commission (FTC) to issue a formal recommendation to retailers that stores take the following steps:

" advertise the store's credit card interest rate and terms as prominently as they display the initial discount and inform consumers verbally of the credit card's interest rate;

" explain that the rate is higher than a typical bankissued credit card;

" and finally that retailers should avoid luring college students and young adults who do not have established credit ratings into accepting store credit cards.

2) Rejecting Excessive Returns: This year there have been several reports by customers who have been barred from returning items to stores, such as Express and KB Toy Stores, where they regularly make purchases. The stores are rejecting these returns based on information from a new database that collects purchase and return data from customers without their knowledge. When a customer reaches the stores threshold for too many returns, the database run by companies such as The Return Exchange tells the retail store and the retail store in turn rejects that customers return. The stores do this in an effort to cut down on shoplifters and those who purchase, use once and then return. However, this practice penalizes many honest shoppers and raises privacy concerns.

Schumer today also urged the FTC to study what consumer information these companies are gathering, what they are telling consumers about the information they are gathering, and whether the companies are disclosing the criteria that consumers would need to meet in order to lose their right to return clothing.

3) Surprise Rate Hikes on Bank Issued Credit Cards: Schumer said that by simply steering clear of the retail store credit cards, shoppers are still not safe from skyhigh interest rates and issued the following warnings:

" Low APRs dont stay low for long : According to the Public Interest Research Group (PIRG), credit cards that offer low starter Annual Percentage Rates at an average of just over 4% will likely raise these rates sharply within months. PIRG found that on average after 6.9 months the rates shot up by 264%. Since last year, this term of a credit card contract now appears in a box with disclosure information that now appears on credit card agreements and is commonly referred to as the Schumer Box by the industry.

" If you pay your bill late just once, you could face fees of up to $39 and your APR could hike to 25%: Paying a credit card bill late can result in bad credit ratings in the long run, but there are also steep short run penalties involved. According to Consumer Action, a public interest organization who does a yearly survey of more than one hundred credit card companies, card holders can be hit with late fees of up to $39. However, the fee is not the only trouble shoppers must look out for: PIRG found that punitive APR hikes after one late payment went as high as 25% for some credit cards.

" If you pay your cable bill late, your APR could go up again: Credit card companies are increasingly using a Universal Default provision in their contracts with card holders. Under this provision, the credit card company has the right to hike a customers APR based on changes to that customers credit history caused by external creditors, including other banks and companies with whom a consumer might have an outstanding debt like the cable company. Consumer Action reports that 44% of credit card companies have a Universal Default policy and industry watch groups have denounced this practice as deceitful though legal. The policy now appears in the fine print of a contract.

" If you go over your limit, itll cost you up to $35: During the holiday season many consumers may approach the limit on their credit cards. PIRG research shows that some credit card companies will charge overage fines of up to $35 for customers who exceed their limits by even $1.

Schumer said that he will introduce legislation to protect Mohawk Valley shoppers from these credit card traps. Specifically, Schumers measure would do the following:

" Disclose Universal Default policies: As discussed above, credit card companies are increasingly using a Universal Default provision in their contracts with card holders that gives the company the right to hike a customers APR based on changes to that customers credit history caused by external creditors, including unrelated entities like the cable company. Requires Universal Default provisions to be moved from the fine print of a credit card agreement and detailed prominently in the Schumer Box.

" Provide advance knowledge of rate hikes: Requires credit card companies to provide advance notice (e.g. 30 days) of any interest rate increase applicable to an outstanding credit card balance, and gives the consumer notice of their right to cancel before the effective date of such increase.

In his letter to FTC Chair Deborah Platt Majoras, Schumer wrote, The holiday season is a great time for retailers and shoppers alike and preserving this mutually beneficial relationship requires honest and fair store policies that maintain the privacy and financial security of customers.