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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (71063)	11/10/2007 7:44:22 AM
From: Crimson Ghost	Respond to of 116555

Big Fees for Little Credit By DAN MITCHELL Published: November 10, 2007 SOME issuers of credit cards are “quietly collecting hundreds of millions of dollars in profits selling nearly worthless, predatory credit cards targeting vulnerable consumers, including those with bad credit,” according to a report published this week by the National Consumer Law Center (consumerlaw.com). How “quietly” these companies are operating may be open to question. But the report states that some companies issue cards with the sole intent of collecting fees from gullible customers — not offering them credit. A typical example the law center offered was this: a card issued with a credit limit of $250. After a $95 program fee, a $29 setup fee, a $6 monthly “participation” fee and a $48 annual fee, the consumer winds up with “an instant debt of $178 and buying power of only $72.” Included in the report is the tale of a sailor on leave who charged $85 to her new card. Because of all the fees, that put her over her $250 limit, which led to penalties and a balance of more than $300. The report names various companies that have issued these cards, including Capital One. That bank “sometimes has used fee harvesting,” according to the report. A Capital One spokeswoman denied that, noting that while the company offers a “full spectrum” of credit products, the only fees assessed, including ones on low-end cards, are late fees and those imposed on borrowers who go over their limits. Unlike other issuers of subprime cards, she said, “we don’t impose application, processing or other such fees.” The report, she said, “completely mischaracterized our business model.” The report singled out CompuCredit, based in Atlanta, saying it has been “frustrated in efforts to get its own bank charter.” The law center said CompuCredit’s financial statements revealed that the issuer “collected $400 million in fees from a portfolio of fee harvester cards that by mid-2007 had saddled cardholders with nearly $1 billion in debt.” The company issued a statement, reported this week on National Public Radio (npr.org), calling the report “misleading.” It also sent a letter to the law center before the report was published insisting, among other things, that its cards “meet or exceed the federal regulatory requirements and industry best practices.” The California Credit Law Blog (californiacreditlaw.com), run by a San Francisco law firm, said, the “fee harvester cards look like credit cards, but they have little or nothing to do with issuing credit.” NY Times