Secret History of the Credit Card
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The interviews edited and published here were conducted by correspondent Lowell Bergman for this FRONTLINE/New York Times report, "Secret History of the Credit Card."

photo of dodd senator chris dodd

A senior Democratic member of the Senate Banking Committee, Dodd has tried numerous times to introduce legislation to curb the credit card industry's practices. His most recent proposal calls for more disclosure about the practice of "universal default" and for disclosing to the consumer how long it would take to pay off the balance if making only the minimum monthly payment. Dodd is most concerned about protecting underage consumers who are incurring steep credit card debt. He has pushed for reforms requiring persons under 21 to prove they have the financial capacity to pay, or have a parent co-sign, or take some sort of a financial literacy course. "We lost that. We've lost that every time I've offered it," he says, and attributes the defeats to the opposition of the "very, very powerful" credit card industry.

photo of janklow bill janklow

Bill Janklow was governor of South Dakota from 1979 to 1987 and from 1994 to 2003. He and his state played a key role in helping the credit card industry take off in the 1980s. In this interview, Janklow tells the story of how South Dakota lifted its cap on interest rates so it could draw capital and jobs and how soon after, Citibank moved its credit card operation from New York, because by making South Dakota its home state, it could then charge higher interest rates. Many other credit card banks followed suit, moving to other states where the cap on rates was also lifted. Today, however, Janklow has mixed feelings about making his state the first credit card capital of America. "It's unbelievable, the lack of sophistication that we have as a society to deal with what I'll call consumer credit," he says. "It really is unbelievable. Do I think I helped foster some of that? The answer is yes, I do."

photo of kahr bill kahr

In the credit card industry, financial services consultant Andrew Kahr is recognized as an innovative thinker whose creative ideas and tactics have helped shape how the business works -- from zero percent teaser rates and the two percent minimum monthly payment, to cash rebates, "by invitation only" solicitations and the concept of universal default. In this interview, Kahr discusses the thinking behind the strategies that he devised, the criticism surrounding some of them, the misunderstandings that exist about how people use credit cards, and his observations on human financial behavior and the economics involved. He also offers his views on the issue of fully disclosing to the cardholder any unusual or new terms on an account and whether disclosure actually has an impact on the cardholder's behavior.

photo of mierzwinski ed mierzwinski

The consumer program director of the U.S. Public Interest Research Group (U.S. PIRG), Mierzwinski has authored many reports on credit cards and credit reporting. Here, he talks about the 10 banks that dominate the credit card industry, the power of its lobby in Washington, why the industry doesn't want the states to have any regulatory power, and the different bills the industry has helped kill over the years that would have protected consumers from unfair practices. He also discusses how the Office of the Comptroller of the Currency -- the agency charged with overseeing some of the biggest credit card banks -- has failed to protect consumers. "I don't see any advertising by the OCC to consumers," he says. "I don't see any aggressive attempt by the OCC to do outreach to consumers. When have they last been on television saying, 'We want to hear from you if your bank has misled you or deceived you?'"

photo of warren Elizabeth warren

A professor of law at Harvard University, Elizabeth Warren is an expert on bankruptcy and an outspoken critic of consumer lenders. She is the author of several books including, most recently, The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke. Here, she discusses the range of deceptive and unfair practices she says the credit card companies try to hide in the fine print of card agreements and she lays out the remedies that should be put in place to protect the consumer. She is especially outraged by those who argue that the debt problems facing Americans is really a tiny fraction of the overall economy and that such consumer spending has helped keep the economy afloat. "Seventy percent of American families last year said that they are carrying so much debt that it is making their family lives unhappy," says Warren. "Middle-class Americans, hard working, play-by-the-rules Americans, Americans who lost a job, who don't have health insurance, who are in the middle of a divorce -- those are the Americans who are carrying enormous credit card debts."

photo of williams julie l. williams

Julie Williams has been the acting comptroller of the currency since October 2004. The Office of the Comptroller of the Currency (OCC) is the federal agency that charters, regulates, and supervises all national and foreign banks in the U.S. (National banks such as Chase, Citibank, and MBNA issue most of the credit cards in the U.S.). She tells FRONTLINE, "If [the OCC] had a basis for concluding that a bank was involved in a practice that was unfair or deceptive … we can tell them to stop it immediately." Williams offers as a prominent example of the OCC's enforcement actions, the Providian National Bank case, in which the OCC concluded that Providian had "engaged in a pattern of misconduct in which it misled and deceived consumers in order to increase profits." She says that the OCC is currently looking at ways to simplify credit card disclosures that are "focused on the key things that the consumers really want to know," and she explains the ways in which consumers can contact the OCC if they have a complaint.

photo of wriston walter wriston

For 17 years, Walter Wriston served as chairman and CEO of Citicorp/Citibank, which issues MasterCard and is the biggest of the four banks that dominate the credit card industry. In this interview, he defends the comparatively high interest rates the industry is charging cardholders, pointing out that consumers can always shop around for better rates. While acknowledging there may be a few problems with credit card solicitations, he maintains "the huge majority of things are handled responsibly" and that Americans' steep credit card debt today is not a problem. "I've looked at it for 50 years, and as soon as the credit card debt begins to decline, you know that the ordinary guy is worried about tomorrow," he says. "And so it's a self-adjusting market. Do people sometimes borrow too much money? Yes. [But] as a percentage of the total -- minuscule. People are smarter than people give them credit for."

photo of yingling edward yingling

Edward Yingling is the incoming president of the American Bankers Association and in this interview speaks on behalf of his member banks, including Citigroup, J. P. Morgan Chase, and MBNA, all of which declined to make executives available for interviews.

Here, Yingling discusses the benefits of credit cards, why ending usury ceilings was a good thing for the consumer, and why bankers must have the flexibility to change terms in the credit card agreement on short notice, citing the bankruptcy filings of the '90s which caught bankers off guard. "We need to make sure people understand this better," he argues. "The product is not a promise to somebody that we will lend you that amount of money forever at that interest rate. It is a very short-term revolving line of credit. If the consumer wants to have an assurance that they will have that amount of money for a longer period of time, they could go to another company and get a one-year loan or a three-year loan. Now the truth is, they'd probably pay a higher interest rate for them."

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posted nov. 23, 2004; updated jan. 5, 2005

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