Unexpected cards irk customers

Citigroup's mailing raises concerns on privacy, security, and credit scores

Citigroup Inc. recently sent Alan E. Gold a credit card he neither asked for nor wanted.

The Haverhill resident thought the new Citi MasterCard was a replacement for his existing Citi MasterCard, until he noticed it had a lower credit limit. He quickly realized that Citi, unsolicited, had sent him a new credit card that was ready to be activated.

"Of all the dopey things," Gold said. "In this time of privacy issues, TJX, and identity theft, why would they send a real live credit card to people?"

The federal Truth in Lending Act bars credit card companies from issuing cards to people unless they request them or submit an application for one.

Officials at Citigroup say they didn't issue a new card to Gold. They say the Citi MasterCard was a replacement for a Macy's card that he hadn't used for more than two years.

Citigroup completed its acquisition of the Macy's credit card business last year and decided earlier this year to replace 3.5 million inactive Macy's cards with MasterCards. The company sent letters to customers in early August explaining the switch and gave them until Aug. 10 to either call a toll-free number and refuse the new card or make a purchase with their Macy's card. If the customer failed to take either action by the deadline, their Macy's card was canceled and a new Citi MasterCard was mailed.

Gold and several other consumers said they don't recall receiving the initial explanatory letter and were stunned when the unsolicited Citi MasterCard showed up in their mailbox. The information accompanying the new Citi MasterCard didn't mention it was a replacement for a Macy's card.

The first letter explaining the credit card switch came in an envelope indicating it was from Macy's Credit Services. The tagline read: "Coming soon to Macy's card members: A whole new card with more benefits than ever."

Larry Carpman of Marshfield says he probably mistook the letter for junk mail and threw it out. He canceled the new card when it arrived. He only learned later from a Globe reporter why the card was sent to him in the first place.

"I still don't think it should have been an opt out. It should have been an opt in," he said. "The card shouldn't have been forced on me. I don't want any more credit cards."

Emily Davidson of Credit.com said consumer credit scores could have been hurt by the replacement of a Macy's credit card with a new Citi MasterCard. The Macy's card could only be used at Macy's stores, while the Citi MasterCard is accepted wherever MasterCard is accepted. The MasterCard also can be used for cash advances and balance transfers.

Davidson said the swap probably triggered a credit inquiry and would have lowered the average age of a customer's credit accounts, both of which could negatively affect a credit score. If the new card had a lower credit limit than the old one, that could also drive down a credit score, Davidson said.

Chi Chi Wu, a staff lawyer at the National Consumer Law Center in Boston, said that the legality of the credit card switch was questionable and that the opt-out approach taken by Macy's and Citigroup was unwise.

"To send out credit cards without people asking for them doesn't seem like a good idea," she said. "The security issues are just huge."

Samuel Wang, a Citigroup spokesman, said there were no security or privacy issues related to the delivery of the new Citi MasterCards. He noted that Citi issued both the Macy's cards and the MasterCards, so no customer data was transferred.

Wang said Citi verified customer addresses with national postal databases before sending the new cards and they couldn't be activated unless the customer called from a home phone and answered a security question to verify their identity.

"We took great care to ensure that our customers were well informed and provided with the opportunity to decline the substitution and remain with their Macy's card," Wang said in a statement. "We have received positive feedback from customers with their new Citi MasterCards."

Jim Sleuzewski, a spokesman for Macy's, said proper safeguards were followed. There have been "very few" complaints from customers, he said.

Legal precedent appears to be on Citigroup's side. In a 2005 decision, a US District Court in Illinois held that Target Corp. did not violate federal law when it unilaterally replaced Target credit cards, which could only be used in-store, with Target Visa cards, which could be used anywhere. The ruling held that the credit card swap was a substitution, which is allowed under federal law.

Gold said the credit card switch could have been legal, but he still thinks it was a bad idea at a time when credit issues are an everyday concern for millions of Americans.

"It was stupid. Even if it was safe, it was still stupid," he said.

To make matters worse, the interest rate on Gold's new MasterCard was just over 16 percent, four percentage points above the rate on his current Citi MasterCard.

"Makes for a sort of double/triple whammy, don't you think?" he said.

Bruce Mohl can be reached at mohl@globe.com.