Citigroup announced it will stop using the “Universal Default” clause for credit card borrowers, which should come as a surprising piece of good news for consumers.
Universal Default is a contractual clause that lets a lender raise your rates to the default rate if you default on obligations with other lenders. Default rates are usually 24% and up.
A debtor who defaults with one lender represents an increased financial risk, and it makes sense for other lenders to raise their rates to reflect the increase. However, going from the low teens to 24% is simply onerous. Also, it just doesn’t seem to make sense, economically or from a customer service standpoint, to treat someone who has defaulted elsewhere as if they have defaulted with you.
In any event, Universal Default is gone at Citigroup. Here’s hoping other credit card companies will follow suit. — BEN POPKEN
About this photo, Citigroup’s logo contains a red umbrella. This picture shows young people frolicking under a red umbrella. There you have it. UPDATE: elton notes that Citigroup actually dropped the umbrella from its logo. We think this makes this picture’s use even more poignant. Citigroup has dropped (one of) its old ways. The duo are cavorting under a vestige of the old system. It’s like dancing with a piece of the Berlin Wall. Very meta.