A Legal Commentary on the Park West Gallery/GE Money Credit Card Statement
Fine Art Registry™ Investigates
by
Cindy Hill, Esq. for Fine Art Registry™
According to reports of cruise ship passengers who have attended art auctions conducted by Park West at Sea, an affiliate of Park West Gallery, after making a successful bid on artwork at such an auction, the purchaser is handed first an invoice to sign (see A Legal Commentary on the Park West at Sea Art Auction Invoice) and then a credit card slip. It is not entirely clear from the passengers' reports whether or how they applied for credit; the credit appears to have been automatically issued without a typical credit card application having been submitted. From the credit card statements which I have reviewed, the credit limits of these cards is also difficult to discern; it may be that the terms are more like a line of credit to the amount of the purchases rather than a fixed-limit card. The terms and limits of these cards can, depending on the financial status of the art customer otherwise, impact his or her credit rating, which is in part dependent upon a balance of net worth and outstanding available credit as well as debt. This impact would vary in each individual case, and for persons with significant personal assets, may make no difference at all; for others the difference may be significant.
Promotional Purchase Terms
The front page of the credit card statement is headed "Park West Gallery/GEMB – GE Money." GE Money is a component of GE Financial Services, which is in turn a sector of the General Electric Corporation. GE was primarily a manufacturing company, engaged in production of appliances and electrical devices, but like General Motors and other large manufacturing companies, diversified into far-flung fields including finance. GE Money operates worldwide, primarily issuing mortgages and facilitating the provision of corporate-brand credit cards, such as the Park West Gallery Collectors Card. Although Park West's name is on the card, it is really issued by the "bank", which is GE Money.
The front of the auction credit card statement describes the art purchase as a "promotional purchase" and does not itemize the purchase, which should be itemized on the Park West at Sea invoice. The table which states the dollar amount of the purchase also states a "Deferred Finance Charge." It appears that if the full amount is paid off within one year (or the specified promotional period), there is no finance charge attached. However, if full payment has not been tendered within one year, a hefty finance charge is levied – calculated at 22.98% per year, a very high interest rate, especially for persons of good credit who are making a large-sum purchase. Tucked into the paragraph labeled "Cardholder News" comes another interesting announcement about that credit rate: "Your periodic rate and annual percentage rate may vary." Fail to pay the bill off in its entirety within a year, and you actually have no idea what you will be hit with for charges. The effect, no doubt, is to encourage everyone to pay the tens of thousands of dollars on the bill in short order, either by actually paying off the bill or by transferring it to a credit source with more favorable terms. Either way, although you don't have to pay cash for your artwork at the auction itself – a fairly standard term at many auctions – you also are stuck paying it off soon, or having to pay hefty fees.
The Fine Print
The back of the credit card statement is covered in two columns of print which is virtually unreadable to eyes over the age of 40. But like the news of the nearly 23% interest rate on the front of the form, the back of the bill also contains interesting information about the Park West credit card.
The first provision found in the fine print is entitled "Billing Rights Summary." It states that any errors in your billing must be brought to the attention of GE Money's Texas address in writing within 60 days of your receipt of the bill on which the error occurs, and notes that calling to discuss the error will not preserve any rights regarding that error.
The second provision is rather unusual. Most credit cards today offer some level of customer purchase protection, allowing the customer to cancel payment for an item purchased with the card if there turns out to be an issue with the item. The terms, however, of the Park West/GE card include a "Special Rule for Credit Purchases" which states: "If you have a problem with the quality of goods or services that you purchased with a credit card and you have tried in good faith to correct the problem with the merchant, you may not have to pay the remaining amount due on the goods or services. You have this protection only when the purchase price was more than $50 and the purchase was made in your home state or within 100 miles of your mailing address. (If we own or operate the merchant or if we mailed you the advertisement for the property or service, all purchases are covered regardless of the amount or location of purchase)."
Since this credit card is issued to persons purchasing art on a cruise ship, it is a fair bet that virtually all of them are more than 100 miles from home at the time of purchase. But the question which is totally unclear is who the "we" refers to in the last sentence which states "If we own or operate the merchant...." If a court interprets that to mean Park West, then all Park West purchases are indeed covered by this consumer protection provision. If, however, it means GE Money, then the Park West purchases, made more than 100 miles from home, are not covered. Since all correspondence, billing inquiries, and payments go to GE Money, I suspect the implication is the latter; on the other hand, at the very end of the fine print terms is a statement that says, "Notice: Please refer to the front page(s) of your statement for the name of the owner and servicer of your account." On these art auction credit cards, the first name listed is Park West Gallery, which might be enough, under at least some states' consumer protection statutes, to support a court decision that this purchase protection provision applies to Park West purchases. The language is sufficiently vague, in any event, that savvy consumers should realize this matter is up to interpretation, and the purchase they have just made on this card might not have the benefit of this protection.
Allocation and Irksome Fees
Much of the remaining terms and conditions are not inconsistent with other credit card provisions – at least, credit card provisions of high-interest, lower credit-rating issued terms, rather than the terms many auction purchasers with significant financial assets might have on
their usual business and personal credit cards. But a few of these terms are worthy of notice.
One is that, in the long paragraph regarding payments, the card issuer "reserves the right to select the method by which payments and credits are allocated to your Account in our sole discretion. The payment allocation method that we use may result in higher Finance Charges on your Account, depending on the types of transactions you make (such as promotional or non-promotional purchases) and the timing and amount of your purchases."
Purchasers who are accustomed to more favorable terms of credit and to business-type bank loans might well be under the assumption that banks must apply your payments first to principle and only then to other fees or finance charges, and that advance payments must be allocated to principle. In the world of lower-end consumer credit, this is simply not the case. The credit card issuer can effectively allocate that money however they like.
Another small but irksome provision contained within the Balance Computation Method section is that the credit card company is attaching a $1.50 fee for every billing cycle in which a finance charge is pending; this apparently applies to the Park West at Sea auction purchases even during the deferment period. Granted, it's a minuscule amount, but when viewed in combination with the shipping, handling, transit, and appraisal fees already charged by Park West and the specter of a nearly 23%, interest compounded daily, credit card fee, it seems gratuitous.
Missing Information
The fine print terms and conditions of credit do note that to change your terms of payment allocation or for other issues, you should call customer service. However, no phone number for customer services is provided. The credit card bill includes the web address for GE Online Service, and a phone number for reporting a lost or stolen card, but no phone number for customer service.
Park West Gallery provides cruise ship art auction services under a contract they have with Cruise Management International (CMI), the Florida corporation which in turn contracts with most of the major cruise lines to provide shipboard entertainment services. Under the publicly available Securities and Exchange Commission filings relative to this contract (and many of the provisions have been sealed), Park West at Sea is required to provide "a customer service department to deal with customer complaints." Letters of complaint to Park West from dissatisfied cruise ship auction purchasers, however, have been responded to directly from corporate legal counsel. Such purchasers have reported that they have not been directed to any customer service or complaint resolution department, nor is any such department noted on the Park West at Sea invoice or on the Park West/GE Money credit card bill.
Another interesting omission from the credit card bill terms, which is also absent from the Park West at Sea invoice terms and conditions, is any indication of what law controls the document or the transaction. It is not uncommon for sales documents, and particularly consumer credit card documents, to contain a provision stating something along the lines of, "This card is issued under the laws of the state of X." The addresses on the credit card bill for various GE Money departments include two different states, and the GE company is headquartered in a third state. But the credit card bill does not indicate under which state's laws the credit has been issued, which adds a level of uncertainty for the consumer in terms of not being able to learn and understand what the applicable law is regarding both issuance of credit and recourse for disputes. Credit card and banking laws vary widely from state to state, including laws regarding what rates of interest and what payment allocation methods are legal. If a consumer doesn't know which state the card is issued from, he or she will have difficulty determining whether the offered terms are legal, or constitute a banking and insurance violation.
Art auction customers should carefully read and knowledgeably understand the credit terms offered before they sign to commit to purchase artwork on these terms. Art purchasers should be aware that they can insist on purchasing through methods other than accepting the credit card as offered. Some Park West at Sea customers have made their purchases, for example, on their own personal credit cards through other banks, and some of these purchasers have then been able to successfully stop payment on the sales when they discovered problems with their purchases, taking advantage of other credit card's favorable customer protection provisions.
As with the terms and conditions of sale noted on the purchase invoice, a wise purchaser at any auction, at sea or on land, will request and inspect all documents regarding the terms of credit for their purchases BEFORE engaging in the auction process, and will not engage in any substantial purchase without fully understanding the terms.
— by Cindy Hill, Esq.
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October 5, 2007
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