Comenity Capital Bank Can Repo Items You Buy With Their Cards

This sounds crazy, but Comenity Capital Bank can come and take items that you purchase with their cards, if you don’t pay your bills. Kind of like when you don’t make your car payments and the repo man comes and takes your car away. This is the fine print they have in the Terms and Conditions:

Commenity Bank

Security Interest

You grant us a security interest in all goods you purchase through the use of the Account, now or at any time in the future and in all accessions to and proceeds of such goods. We waive any security interest we may have in your principal dwelling, to the extent that it would otherwise secure any obligation arising hereunder.

I’m not sure how this would be carried out, but in theory, they can send their guys to reclaim items you have bought with the card. If you resold those items on Amazon, they are entitled to take those profits away from you.

Credit cards traditionally have represented what’s known as unsecured debt, meaning no collateral is required to receive the loan. If a borrower fails to make payments, the lender has few choices except to negotiate a settlement for less money or file a lawsuit.

Secured debt, on the other hand, is guaranteed by collateral. Car and home loans are the most common forms of secured debt. Comenity is doing the same thing. They offer many store credit cards and are securing their credit-card loans with all the goodies cardholders put on plastic. This kind of thing fell out of favor among many card issuers in the 1990s, after Sears paid $273 million in refunds to customers to settle charges that it used a security interest provision to unfairly muscle people into making payments.

“I’ve never heard of anything actually being repossessed,” said Linda Sherry, director of national priorities for the advocacy group Consumer Action. “But these cards make it clear they can do it if they want.”

A Comenity spokesman, Larry Meltzer, declined to address whether the bank would dispatch repo men to cardholders’ homes. He said only that “the security interest clause in the terms of Comenity’s credit card agreements is designed to preserve rights it may have under applicable laws.”

Your stuff should be safe though, most likely. “It’s all about the threat factor” – said Douglas Crowder, a Los Angeles lawyer specializing in consumer debt issues. “If it was a large enough purchase, it might be worth their while,” Crowder replied. “For anything with a resale value of less than $2,000, say, it’s hard to imagine they’d go to the trouble and expense.”

Read more at LA Times

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