Secret History of the Credit Card
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What are your views on  the techniques used by the credit card industry to earn record profits and get American consumers to take on more debt?
handing over a card [photo]fico score screen [photo]interest rates [photo]computer screen [photo]

Dear FRONTLINE,

I just watched 'Secrets of the Credit Card Industry' for the first time. Great reporting! I have had a number of bad experiences with credit cards over the past 20 years and am now striving to pay off all my revolving debt.

The biggest issue revealed in this story is the complicity of the federal government in allowing abusive practices by credit card issuers, including the failure of the OCC (Office of Comptroller of Currency) to prohibit unfair practices and the willingness of Congress to pass legislation which benefits card issuers.

When I saw Eliot Spitzer being interviewed, it made me wonder if the card issuers and the federal government were somehow involved in the disclosure of his visits with prostitutes. We need a grassroots movement to force card issuers to stop cheating consumers.

Joe Douglas
Anchorage, Alaska

Dear FRONTLINE,

I use to have credit cards a few years ago and I got into trouble with them. I was not able to go through bankruptcy because the amount owed on them was not quite enough. However I got them paid off and under no circumstances will I ever have any kind of credit card the rest of my life it is cash only and if I don't have it I don't buy it. Also my other half went through a similar situation with credit cards and he will not have them ever again either.

We are getting along quite well without them. We also got tired of being riped off by the credit card industry. We send all offers from credit card companies with a note telling them we won't pay there high fees and interest and do not send any more offers and they don't.

Las Vegas, NV

Dear FRONTLINE,

Your report, which I just watched tonight, was very disturbing because it was so unbalanced. Yes, I will agree that credit card businesses position themselves to make maximum profit by selling their credit card services. But what is really alarming and far more irresponsible is your lopsided reporting of the whole issue. At no time did you explain how the consumer has the ultimate power in this issue, what that power is, and how to use it.

If I don't like the terms of the credit card, I don't have to use it and I don't have to even open an account. The problem is caused as much by the greed and irresponsibility of the consumer as it is by the greed and deceptiveness of the creditor. If I choose to make a deal with the devil, I know that I'm getting involved in

Dave Sucsy
Lubbock, Texas

Dear FRONTLINE,

I am about to receive my "first (secured) credit card". I have never had a credit card before this time. Now at 46 years old, I have learned that I am not the best manager of my money. So my partner will help me to control my use of the card.

It is rather acidic how the credit card companies have roped the consumer into mega-debt. I think that people should get a book on the use and management of credit cards and other forms of credit so that they are fore-armed with the knowledge of just what they are doing. I also think that lobbyists should be tightly controlled. At this time they pay dues for protection to a banking association to keep them insulated from the laws that protect the consumers of thier product. And that is just wrong!

Chrissy Strawn
Portland, OR

Dear FRONTLINE,

Frontline, Thank you for exploring some of the hidden facts the banks don't want the consumer to see. I was shocked to learn that the OCC did not include the consumer as the number one reason for their existence. The institutions practices come across as very shady. I can also see why the innovator of 0% financing didn't want you to identify his whereabouts. Go figure.

F Eitzen
Lansing, Illinois

Dear FRONTLINE,

I missed most of the Frontline show, so I don't know if you covered the Office of the Comptroller of the Currency (OCC) standard policy of turning over customer complaint letters about banks the OCC regulates to the banks against whom the complaint is filed. I have a copy of letter Senator Charles E. Shumer's office sent me that he received from the OCC Deputy Ombudsman stating that it is standard practice for the OCC to provide "a copy of the consumer's complaint to the institution in question." The OCC let the bank I complained about, MBNA, investigate itself and then mailed me a copy of their findings. I complained that MBNA put in a 24 hour extra delay in crediting Internet payments, something no other credit card company did for a weekday Internet payment before 3:00 PM. No problem, according to an MBNA vice president, so no problem for the OCC, the national banks' lapdog.

In a Wall Street Journal article on the appointment of John C. Dugan as Comptroller of the Currency (August 19, 2005; p.A4), the article indicates Dugan's view, that "bank fees finance its [OCC] $519 million dollar budget, not taxpayer money." Sole source funding from the industry that it regulates. Nice for the OCC, a law enforcement agency, not so nice for anyone with a predatory card issuer [please refer to the US Supreme Court decisions on the two Ohio bootlegger cases that deal with law enforcement fees and fines versus due process and the impartiality of the hearing officer: Tumey v. State of Ohio, 273 U.S. 510 (1927); Dugan v. State of Ohio, 277 U.S. 61 (1928)]. How can any credit card holder expect due process from a Federal agency that acts as a paid adjunct of the banking companies it regulates, in possible violation of the Tumey decision (the later Dugan decision restricted the findings in Tumey v. State of Ohio)?

The answer is you don't get due process from the OCC, just lies from their friendly white-haired PR spokesperson.

Judge CraterFlushing, NY

(The last time I used my real name, in my letter to the OCC, my MBNA rate jumped to 29%. MBNA was in the process of selling itself to Bank of America, so my complaint may have riled someone at MBNA).

Judge Crater
Flushing, NY

Dear FRONTLINE,

Fantastic show! Too bad nothing has changed in 2007.Not only are the banks still charging uncapped interest, late fees and all kinds of other fees; they continue to mail out credit card and balance transfer offers with all your personal information on them.The solution is simple: the government needs to rewind 15 years to fair interest rates and fees with caps.

Our government is allowing the banks to be loan sharks. The only way out for the consumer is not to have a credit card at all!

Diane Watson
freeport, ny

Dear FRONTLINE,

While I agee that the banks are certainly taking advantage of people with credit cards, I also think people are equally responsible for the problem. I don't understand why people can get so far in debt and think there will not be consequences when they fail to pay the balance for long periods of time. This is just simple math. It's the same thing with the ARM mortgages, everybody wants to blame the banks, but they are just as responsible for letting themselves get in that position.

We don't need more laws, we just need to take more responsibility for ourselves. Everybody seems to think the government should bail them out every time they have a problem, but the solution is don't allow yourself to get in that position in the first place.

Gary Johnson
Colorado Springs, CO

Dear FRONTLINE,

Unbridled greed is usually the downfall of humans and institutions. Failing to control that greed through regulation and oversight in the name of the free market is now being seen in the collapse of our financial markets. These free market business people are now the ones running to the government for a bail out when a few simple regulations would have provided good profits, good service and a stable social and financial environment.Senator Dodd and the Harvard professor of contract law are not only prophets but the best kind of American Heros!

Dash Gastineau
Indianapolis, Indiana

Dear FRONTLINE,

If credit card companies can't disclose the future cost of paying the minimum balance.... They certainly can disclose the interest & fees you have paid in the past 12 months!

Bill Tam
Buffalo, NY

Dear FRONTLINE,

That was an incredibly unbalanced and biased piece of reporting. The Harvard Lawyer obviously has an agenda and certainly overly emotional and dramatic for an academic. Apparently she's the only lawyer who doesn't understand the difference between a secured loan (mortgage) and an unsecured (credit card)loan. If you don't pay your mortgage, the bank has something to sell (your house) to get their money back. With a credit card, the banks have no recourse to get their money back. Credit is not a right. You have the right to use cash, live within your means and to save for a rainy.

Fl,

Dear FRONTLINE,

The bottom line is that the American Consumer should take the brunt of the responsibility for their ignorance, obliviousness, and indifference to the credit card problem. Banks are there to sell a product, and in the process, make a profit. Why should they be chastised for doing whatever they see fit to accomplish that goal. Nothing is more powerful than an informed consumer, and only they can make a difference.

David Roman
Collinsville, IL

Dear FRONTLINE,

I think Credit card companies are like a Beast. You can use it to your advantage if you pay your due balance in time in 25 days.

To me it is 25 days interest free loan. When comes to spending be careful. Do not buy stuff on impulse. I consider credit card as a loaded gun! Each dollar is compared to a bullet which is life. Do not use it for frivolous cause. You will run out of ammunition and will have no time to reload. And the Beast will take command over you. I mean do not spend your paycheck before it comes.

Credit card is very good tool for me to document my expenses. Some of the card companies will categorize it for me and send me an annual report showing me how much I spend on food, lodging, gasoline etc.

About the high interest rate, I agree it is an unsecured loan, the higher risk have higher rewards. I do not think regulating Credit Card companies will do a whole lot more good. Every time government interferes with regulation, the companies take advantage of the loopholes from regulations.

Greenwood, In

Dear FRONTLINE,

Pleased to see PBS discuss an issue I have been railing about for a number of years--see, e,g,, my website--www.lonelypamphleteer.com. More than the disclosure Sen. Dodd calls for is needed. We might, for example, bring back the usury laws that perhaps were repealed by campaign contributions. The interest rates of 29.99& --indeed rates from, say, 15% and up--are the stuff of a Henry J. Potter, not a business person who believes profits are the result of service to the people. Perhaps, however, that notion is not mentioned in MBA programs. Potter was a fictional banker in Capra's wonderful "It's a Wonderful Life." I know that Andy Kahr is very real; he was a high school classmate. But Andy, who was generally regarded, in high school, as having a brilliant mind, couldn't have gotten the aggrandizing (pls see first half of Federalist 57) credit card practices of today put into effect without the support of business leaders, lawyers and politicians who, I guess, regard us, the way Potter regarded people--as rabble to be squeezed and then kicked around. Not exactly a mindset a free people can be expected to tolerate for long. I mean, the Berlin Wall, didn't it? Muhammad Yunus, it is time to leave Bangladesh and return to the US to promote the concept of thecompassionate credit card company. Suggested motto: " First, serve the people; second, realize the profits."profits.

David Zukerman
bronx, ny

Dear FRONTLINE,

The credit card industry is not all doom and gloom for the American consumer. I've been methodically doing what I call the 'Credit Card Shuffle' for 10 years. This method involves looking for low rate balance transfers and building a network of cards and credit companies to provide a nearly perpetual access to 0% - 4.9% APR under their balance transfers. In the last 10 years, I've used this method to place down payments on 3 homes, 2 rental properties, and purchase 6 cars. I've been through unemployment, divorce, and 3 major cross country moves - but have never been late on a single payment and have meticulously met the terms of each card's agreement. I've saved thousands in auto and home loan interest over the last 10 years.

In the last 2 years, I've reached the point where I actually produce low risk returns on the 0% offers flooding my home. I invest balance transfer money into CD's and other low risk investments. The cost to access this money? - a $50-$75 balance transfer check fee, which is easily earned back. This last summer I was able to fund an entire trip to Sea World in San Diego for my family using interest from a CD funded by balance transfer money. In addition, I have 2 other credit cards which are paid in full each month that I funnel as many monthly bills and every day purchases through which earn 1% return or greater in cash or merchandise. I'm worse than a 'dead beat'. It merely takes discipline and meticulous planning to beat the system.

Obviously, I'm in the minority, but it is possible. Thanks in part to credit cards, I've been able to take myself from a negative net worth in college to a positive net worth in just 10 years, survive job loss, divorce, and still come out on top. The fundamental key for avoiding debt and building net worth is to live a lifestyle below your take home income. Laws and regulations on the credit card industry cannot teach this basic concept to a consumer.

I'm by no means advocating what credit card companies are doing to those who have little self control, but merely providing the viewpoint that many Americans lack a basic understanding of money flow and even credit card companies can be beat at their own game. There's always a way for capitalism and a competitive market place to be used to one's advantage - that's the American way.

D M
Clinton, UT

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posted nov. 23, 2004

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