American Credit Card Industry: Making the Sopranos look like the Cleavers
As you might guess, I, like many Americans, have had a few surprises when reviewing my credit card statements. Recently one bank jacked up the rate on a card to over 23%. When I called to complain, they explained that in a document they had sent months ago (you know, one of those microprinted, 30-page documents with legalese even most lawyers can't make out) they had alerted me to the fact that if I actually use my card (i.e., keep what they consider a "high" balance), they have the right to reassess the risk I pose and jack up the rate. Mind you, I never went over the limit, and I always paid on time. There were no mistakes made in any other of my financial arrangements. Simply because I decided to let the purchases on one card sit a few months, they decided they should rob me.
I called and cancelled the card immediately and gave the two representatives unlucky enough to take the call a piece of my mind (I had to be triaged up to a supervisor, so unsuccessful was the first representative in explaining to me why their actions were not criminal).
Again, I know I'm not the only American experiencing such extortion. And it's unquestionably out of control. From Today's New York Times:
The federal agencies that are supposed to regulate the banking and credit card industries have failed utterly to keep pace with deceptive and unfair practices that have become shamefully standard in the business. As a consequence many hard-working Americans who pay their bills are mired in debt — and in danger of losing whatever savings they have, and perhaps their homes. Congress, which sat on its hands while the problem got worse and worse, needs to rein in this sometimes predatory industry.But what has this got to do with art, you ask? Not much, actually. Although I did find this incredibly cynical ploy by a credit card company on (Notes on) Politics, Theory & Photography:
The scope of the problem was laid out in Congressional hearings this spring held by Senator Carl Levin, the Democrat from Michigan. According to testimony, one witness exceeded his charge card’s $3,000 limit by $200 — triggering what eventually amounted to $7,500 in penalties and interest. After paying an average of $1,000 a year for six years, the man still owed $4,400.
That experience has become all too common as the credit card industry has stealthily adopted methods designed to maximize burdensome penalties and fees, while ratcheting up interest rates as high as 30 percent. Companies bombard unwary consumers with teaser packages that promise very low interest rates to start, while reserving for themselves the right to raise rates whenever they choose. The details are buried in deliberately arcane contracts that run 30 pages long and that even lawyers have trouble understanding.
Congressional investigations and studies by consumer advocates have exposed other unsavory practices. Some card companies apply penalty rates retroactively — to purchases that were made before the penalty was incurred or in some cases to debts that were even paid off. As one Congressional witness pointed out, the credit card industry is the only one allowed to increase the price of a product after it has been sold.
Under a provision known as “universal default,” a cardholder who pays a credit card company faithfully can still be hit with a high penalty interest rate for missing payments with another creditor. In another despicable tactic known as “double cycle billing,” a cardholder who pays $450 of a $500 balance is charged interest on the entire amount as opposed to the unpaid balance.
State usury laws would once have precluded many of these practices, but those have been preempted by federal regulations that are increasingly designed to make banks and credit card companies happy — rather than protect consumers.
Some time ago my friend Susan Orr pointed out a really troubling advertisement on Alternet for a new gimic from Visa - the "Enlightenment Card." Touted as "a socially conscious credit card" the new gimmic panders to the narcisscistic demographic that somehow has convincced themselves that consuming itself is a political act. Hence, the purveyors announce:Everyone uses a credit card. (Well, that's a slight exaggeration, but continually becoming less of one.) And therefore, it behooves our representatives in Congress to ensure that everyone is protected from the utterly faithless industry flogging credit cards."The Enlightenment Visa Reward Card was founded on the idea that money is energy and if used with positive and integrative intention, can have the power to affect change in our lives and the world. Everyone uses a credit card, so why not have one where people can earn points towards positive products and services that enhances their overall conscious life?"
Again from the Times:
A bill introduced by Senator Levin would limit “penalty” interest rates to an additional 7 percent above the previous rate. It would also prohibit retroactive penalties and double cycle billing, and it would limit the amount of fees companies could charge customers who exceed their credit limit.Remember, I didn't even exceed the credit limit or miss a payment. The "penalty" thrust upon me was due to simply using the card the way I always believed I could (and not understanding the new, virtually incomprehensible, conditions sent long after I had started using the card).
Passing the Levin bill would be a good start. But Congress needs a comprehensive approach to this problem. Lawmakers need to ban deceptive card offers outright, strengthen federal oversight and toughen truth-in-lending laws.
In addition to the steps Levin's bill would take, I have an additional suggestion for our legislators to work on enacting:
The essence of any changes in the rules and regulations for any credit card must be presented to the customers in large, easy to understand print. The central idea of any change, which the bank's representatives manage to convey in one sentence if you're screaming down the phoneline at them, should be printed extra large at the top of the legalese gobblygook. "NOTE: Your rate will skyrocket if your balance remains over X% of your limit for X months, even if you pay on time and never exceed your limit."At least give the busy businessman or parent or whomever the courtesy of not having to rush out and get a law degree to understand how you intend to rob them. At least give them the chance to cancel the card before you do what you know the changes were meant to do: screw them. At least Tony Soprano and his crew explained the terms of the loans they offered in clear English...the credit card industry should endeavor to operate at least with that much integrity.
Labels: credit cards