Yeah, I get an email every 2 weeks telling me to get on "protection". Right now, if I go over, I just get declined, period. If I'm "protected" I have 24 hours to put money in, or pay a $35 fee.Hahaha. That's much better then the previous system, where if you used your card x times after running down your account, they would charge you x fees. oh and of course they would re-order your transactions to maximize the number of overdraft fees they could charge. So if you bought a stick of gum, and then a $400 TV the same day, you'd get two over draft fees, and even though it was only one purchase that put you under.
As credit card companies face rising public anger, new regulation from Washington and staggering new rates of default and bankruptcy, FRONTLINE correspondent Lowell Bergman investigates the future of the massive consumer loan industry and its impact on a fragile national economy.
In The Card Game, a follow-up to the Secret History of the Credit Card and a joint project with The New York Times, Bergman and the Times talk to industry insiders, lobbyists, politicians and consumer advocates as they square off over attempts to reform the way the industry has done business for decades.
"The card issuers could do anything they want," Robert McKinley, CEO of CardWeb.com, tells FRONTLINE of the industry's unchecked power over consumers. "They could change your interest rate. They could impose an annual fee. They could close your account." High interest rates along with more and more penalty fees drove up profits for the industry, Bergman finds, as the banks followed the lead of an aggressive upstart: Providian Bank. In an exclusive interview with FRONTLINE, former Providian CEO Shailesh Mehta tells Bergman how his company successfully targeted vulnerable low-income customers whom Providian called "the unbanked."
"They're lower-income people-bad credits, bankrupts, young credits, no credits," Mehta says. Providian also innovated by offering "free" credit cards that carried heavy hidden fees. "I used to use the word 'penalty pricing' or 'stealth pricing,'" Mehta tells FRONTLINE. "When people make the buying decision, they don't look at the penalty fees because they never believe they'll be late. They never believe they'll be over limit, right? ... Our business took off. ... We were making a billion dollars a year."
It took the economic collapse in the fall of 2008 to set the stage for potentially historic change in the consumer credit business. President Obama and his team pushed through a credit card reform bill in May, and they're now looking to establish a new Consumer Financial Protection Agency. But the banking and financial services industries contribute huge amounts of money to Congress -- and the jury is still out on whether the new regulations can pass. "It's a step in the right direction, but it's a modest step," says Harvard law professor Elizabeth Warren. "It's a set of very discrete new laws. And the credit industry instantly set to work on how they could run around them. By itself, that set of rules won't change the game."
"It's hard for them to get a bill through the U.S. Senate when the industry is pouring money into Washington," says Martin Eakes of the Center for Responsible Lending of the banks' political clout. "As Sen. [Dick] Durbin from Chicago recently said, 'the banks, even as unpopular as they are right now in this crisis, still own this place.'"
Right now, every time you swipe your debit card your bank charges the retailer an average fee of 44 cents, which it shares with its partners. Those little fees, however, add up to about $16 billion per year, according to 2009 data from the Federal Reserve.tl:dr -- yes, it's all about decreased revenue.
But as part of the Wall Street reform legislation that was passed last year, these fees are being slashed. The Fed is currently proposing rules that would go into effect in July and would cap interchange fees at 12 cents.
That's a big enough cut to cost Chase (JPM, Fortune 500) more than $1 billion a year. And Chase may not be alone. Other major issuers are also projecting huge losses from the interchange fee cap.
« Older Fuck Yeah Nouns While it remains unclear if we'... | L'Eroica in Italy offers somet... Newer »
This thread has been archived and is closed to new comments
posted by TwelveTwo at 7:54 PM on March 10, 2011