Man bites credit card company
Some stories are so perfect and so funny you begin to wonder if they're apocryphal. However, a recent news story out of Russia seems to be quite a rare gem -- it's funny, satisfying and true.
A credit card company's worst nightmare
Back in 2008, 42-year-old Dmitry Argarkov of Vornonezh, Russia, received an unsolicited letter from Tinkoff Credit Systems, inviting him to apply for one of its credit cards, according to a recent Russia Today report. Unusually, he read the terms and conditions in the enclosed contract. Even more unusually, he then changed them to better suit his needs:
- Out went the bank's APR, to be replaced by a permanent zero-percent rate.
- The credit limit went up to… infinity. He was entitled to borrow whatever he wanted.
- All fees, including penalties, were eliminated.
Actually, that last point isn't entirely accurate. Although he eliminated all the fees for which he might be liable, Argarkov introduced new ones that Tinkoff, Russia's biggest online bank, would have to pay to him. On each occasion the bank breached his rules, it faced a penalty of 3 million rubles (about $90,000). And, if it tried to cancel the agreement, it would have to pay twice that.
Tinkering with Tinkoff's contract
Argarkov scanned Tinkoff's original standard-form contract, and then made, er, minor adjustments using his computer. He printed out the new version, signed it, and mailed it back to the bank. At first glance, it looked just like the original card agreement, so a bank official signed it without reading it.
Everything went along fine for a couple of years until Tinkoff decided to cancel the card, owing to late payments, and then sued Argarkov for roughly $1,350. But at an early August hearing, a judge ruled in the defendant's favor, ordering him to pay just $575, which was his outstanding balance less all fees.
Now Argarkov is launching his own suit against Tinkoff, claiming 24 million rubles (about $727,000) for its alleged breaches of his terms and conditions.
It won't work here
In the same week the Russian court largely rejected Tinkoff's case, The Detroit News revealed that American credit card companies mailed 1.1 billion solicitations in the second quarter of 2013, based on data from Mintel. Don't get any big ideas.
American attorney Kevin Funnell, who specializes in banking law, explained on his blog that it is highly unlikely that a case like Argarkov's would succeed in the U.S. If the amendments had been made clear, so that the person who signed on behalf of the card issuer had been aware of them, then there was a chance an American court might side with the consumer. But changes buried in the small print would almost certainly be rejected by a judge.
"As to any American consumer thinking of trying the same thing: Think of something else," Funnell wrote on his blog "Attempting to pull a fast one is never a solid financial game plan."
Really? A banking lawyer moralizing about pulling fast ones? Honestly, these Wall Street types have no self-awareness.
What's so funny?
This is what makes Argarkov's case such a good anecdote. After years of credit card companies slipping "gotcha" clauses into contracts, and decades of their preaching to consumers about the importance of always reading the small print (while making the language contained therein as dense and incomprehensible as possible), they finally got some of their own medicine.
As Argarkov's attorney Dmitry Mikhalevich said after the hearing, "They signed the documents without looking. They said what usually their borrowers say in court: 'We have not read it.'"
Credit card contracts fairer
Having said all that, American credit card contracts generally seem fairer today than they once were. There may still be a few rogue companies trying it on, but in the wake of the Credit CARD Act of 2009, things have mostly gotten better. More importantly, most of us like our plastic, and if enough consumers followed Argarkov's lead, the corporations that issue them would go bust.
However, an issue remains: Most of us sign or otherwise accept terms and conditions almost every day, and do so without reading them. We close our eyes and cross our fingers every time we update an operating system or application, or register with a website, or buy a car, or take out a loan. It's simply impossible for a 21st-century consumer to read in full every contract she or he is bound by. But our legal system, which is largely based on 18th century or older principles, has yet to catch up with that reality.
One solution for credit card companies and their customers is currently being proposed by the Consumer Financial Protection Bureau. This federal regulator is developing a shorter, simpler standard card agreement that it hopes issuers might adopt. This could protect both sides from the unprincipled. In the meantime, we -- like those in Dmitry Argarkov's country -- must play the contractual equivalent of Russian roulette on a daily basis.
Published 08/23/13 (Modified 11/20/13)