Explanation: Refers to the practice of considering someone in default on a loan or credit card due to late payments or defaults on an unrelated credit card, loan or bill.
Imagine you have a credit card and a mortgage. If your credit card company practiced universal default and you missed a payment on your mortgage, then the interest rate on your credit card would automatically increase to the Penalty/Default APR even though, for the purposes of this example, you have not missed a payment on the card.
Background: This practice became illegal for consumer credit cards with an Act of Congress -- the Credit CARD Act of 2009. The only way the interest rate on a consumer credit card can increase now is if payment is 60 or more days delinquent.