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Difference between revisions of "Credit Cards"
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== Summary of the law== | == Summary of the law== | ||
Liability (responsibility) for charges made on credit cards follows the basic rules of contract law. In most instances, the agreement is made between the consumer applying for the credit card and the creditor accepting the application. The creditor issues the credit card subject to the consumer accepting the terms set out in a cardholder agreement. | Liability (responsibility) for charges made on credit cards follows the basic rules of [[Contracts Overview|contract law]]. In most instances, the agreement is made between the consumer applying for the credit card and the creditor accepting the application. The creditor issues the credit card subject to the consumer accepting the terms set out in a cardholder agreement. | ||
=== Types of credit card agreements=== | === Types of credit card agreements=== | ||
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==== Disclosing the cost of borrowing on credit cards==== | ==== Disclosing the cost of borrowing on credit cards==== | ||
Under the ''Business Practices and Consumer Protection Act'', credit cards are a form of “open credit” (the borrower is not borrowing a fixed or agreed amount of money). The Act requires lenders who extend open credit to make a statement available to the consumer in advance that explains the cost of borrowing on the credit card (see the section on Interest and the Cost of Borrowing Money). Once credit is extended, the lender must issue periodic statements showing details such as the total amount credited and the outstanding balance. In most cases, consumers get this information as part of their usual monthly statement. | Under the ''Business Practices and Consumer Protection Act'', credit cards are a form of “open credit” (the borrower is not borrowing a fixed or agreed amount of money). The Act requires lenders who extend open credit to make a statement available to the consumer in advance that explains the cost of borrowing on the credit card (see the section on [[Interest and the Cost of Borrowing Money]]). Once credit is extended, the lender must issue periodic statements showing details such as the total amount credited and the outstanding balance. In most cases, consumers get this information as part of their usual monthly statement. | ||
==== Liability for lost or stolen credit cards==== | ==== Liability for lost or stolen credit cards==== | ||
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==== Liability for jointly held credit cards==== | ==== Liability for jointly held credit cards==== | ||
An important concern for consumers is their liability or responsibility when cards are issued to co-applicants or when cardholders agree to add other users to their existing credit card (see the section on Co-signing, Guarantees and Joint Debts). Liability for jointly held credit cards is not dealt with in the [http://canlii.ca/t/84mr ''Business Practices and Consumer Protection Act''] — it is a matter of contract law, based on the cardholder agreement. | An important concern for consumers is their liability or responsibility when cards are issued to co-applicants or when cardholders agree to add other users to their existing credit card (see the section on [[Co-signing, Guarantees and Joint Debts]]). Liability for jointly held credit cards is not dealt with in the [http://canlii.ca/t/84mr ''Business Practices and Consumer Protection Act''] — it is a matter of contract law, based on the cardholder agreement. | ||
In general, cardholder agreements stipulate that each authorized user of a card is jointly and severally liable for the debts incurred on the card. This means the creditor can claim the full balance on the account from any of the holders, regardless of how little or how much each individual actually charged on the card. That liability continues at least until one of the parties to the agreement terminates the agreement. Responsibility for the debts of another cardholder may well continue until that cardholder’s card is physically recovered and returned to the financial institution. | In general, cardholder agreements stipulate that each authorized user of a card is jointly and severally liable for the debts incurred on the card. This means the creditor can claim the full balance on the account from any of the holders, regardless of how little or how much each individual actually charged on the card. That liability continues at least until one of the parties to the agreement terminates the agreement. Responsibility for the debts of another cardholder may well continue until that cardholder’s card is physically recovered and returned to the financial institution. | ||
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The distinction between merchant credit cards and financial institution credit cards becomes important when the consumer has a problem with products or services purchased with the credit card. Usually, the consumer’s reaction is to refuse to pay the credit card bill, or at least the amount on the bill relating to the problem product or service. | The distinction between merchant credit cards and financial institution credit cards becomes important when the consumer has a problem with products or services purchased with the credit card. Usually, the consumer’s reaction is to refuse to pay the credit card bill, or at least the amount on the bill relating to the problem product or service. | ||
Disputes between a consumer and a merchant over a purchase on a merchant’s own credit card are usually resolved according to general principles of contract law. The parties can negotiate or they can go to court. If the matter goes to court, the court’s decision on the merits of the case governs the liability on the credit card, or at least the credit card purchase. | Disputes between a consumer and a merchant over a purchase on a merchant’s own credit card are usually resolved according to general principles of [[Contracts Overview|contract law]]. The parties can negotiate or they can go to court. If the matter goes to court, the court’s decision on the merits of the case governs the liability on the credit card, or at least the credit card purchase. | ||
Disputes between a consumer and a merchant over a purchase on a financial institution’s card are more complicated. Usually, the consumer has little right to refuse to pay the bill from the financial institution. Cardholder agreements generally contain terms that mean that the consumer must pay for charges on the card regardless of product or service quality, and that the bank is not in any way responsible for consumer-merchant disputes. However, some cardholder agreements do contain special terms that are essentially warranties or insurance for the purchases made using the card. | Disputes between a consumer and a merchant over a purchase on a financial institution’s card are more complicated. Usually, the consumer has little right to refuse to pay the bill from the financial institution. Cardholder agreements generally contain terms that mean that the consumer must pay for charges on the card regardless of product or service quality, and that the bank is not in any way responsible for consumer-merchant disputes. However, some cardholder agreements do contain special terms that are essentially warranties or insurance for the purchases made using the card. | ||