A very wide loophole for unsolicited cards

The Baltimore Sun

The Q:

Vivikka Molldrem of Edgewater was perturbed to find a Wal-Mart Discover Card in her name sitting in her home mailbox last month. All she had to do to activate the $1,000 credit limit card was call a toll-free number.

"I have never shopped at Wal-Mart, have never owned a Discover Card, and have never requested a Discover Card," Molldrem said. "I get credit card offers multiple times a week, and I usually just throw them in the trash without reviewing them carefully. This one looked like a typical credit card offer, but my husband opened it up while I was out of town and to his shock, it contained a fully functional card."

Tossing a fully functional card out could expose the couple, Molldrem said, to anyone picking through the trash and activating the card.

Wondering how the company could get her name and why it would expose people to security risks, Molldrem said the couple called the customer service number given on the back of the card. Molldrem said she was told that Wal-Mart Stores Inc. purchased the now-long-gone Montgomery Ward's store card list and issued the new Discover cards to people on that list.

Molldrem did own a Ward card years ago, but she has no interest in owning a Wal-Mart Discover Card, she said.

Is it legal for a company to send you an unsolicited credit card in the mail, she wondered? And who would she call to lodge a complaint?

The A:

There's no simple answer for either question.

First, I called Wal-Mart to inquire about the Discover cards. But a Wal-Mart spokesman said I should call Discover. When I called up Leslie Beyer, a spokesman for the Discover Network, she said I should call GE Money. Turns out, the Wal-Mart Discover Card is issued by GE Money, which used to be GE Consumer Finances.

Before I got a chance to speak with GE Money, I discovered that in 2001 a Wal-Mart spokesman had said Wal-Mart credit cards were being sent to customers who previously held accounts with Montgomery Ward. At the time, the spokesman said the effort was "an attempt to renew" the old Ward cards.

A GE Money spokesman said it was unlikely the company would send a card to a customer who did not request it, but regardless of whether GE Money, Wal-Mart or Discover was responsible, Molldrem has some rights.

The federal Truth in Lending Act does prohibit companies from sending cards to consumers without their request, but (and this is a big but) there are loopholes.

"What can happen is when a company buys another company, they can decide to switch credit card providers or they can renew a credit card list," said Linda Sherry, director of national priorities for advocacy group Consumer Action. "They're never supposed to send you a card you didn't request, but they can replace your card with another card."

As an example, Citigroup recently acquired the credit services division of Macy's and began replacing dormant credit accounts of more than 3 million Macy's cardholders with Citi MasterCards. Many consumers were not pleased to find out that their credit scores could have taken a hit if they canceled the card - which they didn't ask for in the first place - since they were essentially closing an old, but still open, line of credit.

"It appears to be legal," Sherry said. "But the bottom line is, it's not a good practice. And it certainly doesn't make a company look good. What happens when you issue these cards to an old address? People move."

Chi Chi Wu, staff attorney with the Boston-based National Consumer Law Center, called the practice "questionable."

"Creditors have exploited the loophole to do more and more things like flipping store cards to general purpose cards. The original intent of the law was to prevent these very situations," Wu said. "They say they 'renewed' cards, but no one was using these cards at the time. I'd definitely say it's questionable."

Molldrem should check her credit report, Sherry said, because even though the card wasn't activated, that does not mean the account is closed.

To reduce the amount of unsolicited credit card offers you receive in the mail, contact the three major credit bureaus by calling 888-567-8688 to opt out of the preapproved credit lists they sell to companies.

You can also complain to any of the federal regulators that oversee banks and finance companies. In this particular case, GE Money is regulated by the Office of Thrift Supervision, which is a part of the Department of the Treasury. You should also write to the Federal Reserve, Wu said.

Reach Consuming Interests by e-mail at consuminginterests @baltsun.com or by phone at 410-332-6151.

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