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BY AVI FRISCH

NEWJERSEYNEWSROOM.COM

A couple of months ago, my credit card company sent me a notice outlining some changes they were about to make to my card member agreement. Normally, changes introduced under such circumstances are insignificant, just minor adjustments to privacy policies and the like.

In this case, however, they threw me for a loop. I was being presented with a change to my minimum monthly payment. And it was no small increase! The amount I had to pay each month was to be increased by 250%.

The reason for this particular notice was clear: the bank wanted to be repaid quickly by me so it could charge much higher interest to someone else (my interest rate happened to be very low). I was of course outraged: why should the fact that the credit card company had previously made a bad deal with me now allow them to just change it at their whim?

Unfortunately, most credit card agreements have provisions allowing the bank to change the terms by providing notice to the cardholder. This leaves credit card holders with two obvious choices; either pay off the card and close the account or accept the changes in terms, which can include significantly higher interest rates.

Since I am a lawyer, this situation allowed me to engage in one of my favorite activities – threatening a lawsuit. Guess what? The bank called with an offer to settle before I ever went near the courthouse. Not only did they relent on the increased payments; they even cut my existent interest rate in half.

This made me wonder, what actually is the law? New Jersey has a statute on the books that allows a credit card company to modify its agreement with a borrower unilaterally so long as the original agreement specifically reserves the right to modify the agreement. The law places two limits on the banks here: 1) they must provide notice of the changes; and 2) changes to the interest rate on outstanding balances may be rejected by the consumer, who in this situation has a right to close the account and pay off any balance remaining according to the original terms.

New Jersey courts have also limited amendments to revising existing provisions of the agreement. A card company may not add new requirements that were never in the original agreement. An example that frequently comes up is the addition of a mandatory arbitration clause to an agreement, which requires all disputes to be arbitrated rather than brought to court. A card company cannot just add this requirement to an existing account.

New federal legislation will limit the ability of banks to raise rates and change other terms of their agreements, but until the law takes full effect in February 2010, it is reasonable to expect the card companies to be particularly eager to raise rates and make things more difficult for consumers.

One thing I have learned is that no one should shy away from challenging a card company. The card companies operate on the assumption people won't challenge them. So go ahead and see whether they are bluffers who will fold their cards and quit the game.

Banks might seem like big bad wolves, but luckily they cannot bite from the other side of the phone.

Avi Frisch is a lawyer in Paramus and Manhattan. He can be reached at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or at his website, avifrischlaw.com.