What is a universal default clause?

A universal default clause is a provision in a credit card agreement that allows a creditor to increase the interest rate on an account if the borrower defaults on any credit account. This means that if a borrower fails to make payments on other accounts, like a car loan or mortgage, the interest rate on their credit card will be increased regardless of their payment history with the credit card issuer. Universal default clauses are used to protect creditors from borrowers who may be in financial difficulty. In Maryland, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 prohibits credit card issuers from including universal default clauses in their agreements with consumers. This means that if a borrower defaults on any non-credit card accounts, the interest rate on the credit card account cannot be increased as a result. This is a positive move for consumers, as these clauses can often lead to increased costs for borrowers who are already struggling financially. Overall, a universal default clause is a provision in credit card agreements that allows the creditor to increase the interest rate on an account if the borrower defaults on any credit account. The CARD Act of 2009 has prohibited credit card issuers in Maryland from including these clauses in their agreements with consumers to protect borrowers from potentially having to pay increased costs due to defaults on other accounts.

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What is a universal default clause?

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