What is a universal default clause?

A universal default clause is a provision found in some credit card agreements that allows the credit card issuer to increase the interest rate that is applied to the cardholder’s account if the cardholder has fallen behind on payments due to another creditor. This clause applies to all credit cards that the cardholder has, and not just the card whose issuer increased the interest rate. This is known as universal default, as all of the cardholder’s accounts are affected by the default of one or more of the accounts. Under the Credit Card Law of Illinois, credit card issuers must provide a clear explanation of the universal default language in its credit card agreement. Additionally, the credit card issuer must provide a 45-day advance notice to the cardholder before they can implement a default interest rate increase in response to the default of another creditor. Furthermore, the Credit Card Law of Illinois states that the cardholder must be provided a clear explanation of their right to opt-out of the universal default clause if they wish. In conclusion, a universal default clause is a provision that allows a credit card issuer to increase a cardholder’s interest rate if the cardholder fails to meet payment obligations on another account. Under the Credit Card Law of Illinois, issuers are required to provide notification of the universal default and the right to opt-out to consumers.

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What is a universal default clause?

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