A Baltimore man is suing mammoth home-improvement retailer Home Depot Inc., claiming it lured him and others to sign up for deferred-payment promotions that aren't the good deal they appear.
Payments intended to reduce high-interest credit balances, the suit alleges, are instead applied to the interest-free promotional balance - sticking buyers with interest when the whole point was to avoid it.
Filed last week in federal court by consumer Joseph King, it is a class action complaint and mirrors two others against Home Depot, in Seattle and San Diego.
"They promote interest-free loans for promotional purchases without telling consumers that they will never get the benefit of that product if they use their card to make a regular purchase," said Nick Styant-Browne, the Seattle attorney representing plaintiffs in the West Coast cases, both filed in December.
Home Depot spokesman Don Harrison said the company, the world's largest home improvement retailer, cannot comment on pending litigation.
King's attorney, Roy A. Katriel, could not be reached for comment yesterday. The lawsuit claims the "scheme" worked like this:
A typical Home Depot promotion is six months with no payments or interest for purchases of at least $299. A customer charges a $1,000 washing machine to a Home Depot store credit card, taking advantage of the deal, and later buys a $200 chainsaw. When she sends in $200 to pay off the second purchase, it's applied to the no-payment balance - and she's hit with 21 percent interest on the chainsaw.
The issue is "payment allocation," a new hot-button topic because it's increasingly common for consumers to end up having balances with different interest rates on the same card, advocates say.
Consumer Federation of America is getting more and more complaints that credit-card companies are applying payments to the lower- or no-interest-rate balances first, said legislative director Travis B. Plunkett. "We look at it as a misleading practice," he said. "This is counter to good debt-management practice; it's counter to all one's instincts, and it's a practice the credit-card companies know harms consumers. And yet they still give themselves the right to do it because they clearly want the consumers paying off higher-interest debt later."
Look carefully at the fine print of a contract, he advises. It might say the company can designate payment allocations in all cases or if the consumers don't do so themselves.
Home Depot's store credit cards were handled by the Monogram Credit Card Bank of Georgia between 2000 and last summer, when Citibank took over the operation. Neither are named as defendants in the Baltimore complaint, though Monogram is a co-defendant in the West Coast suits.
General Electric Co., Monogram's parent company, said it intends to defend the lawsuits "vigorously."