Your Credit Card Company Says, ‘For Shame!’
Now this is rich: Credit card companies apparently monitor your spending and cut credit lines when they think you’ve gone morally astray. So if you’ve been to a marriage counselor, run up a bar tab, gone to a billiard hall, or visited a massage parlor, your credit issuer might limit your credit in return.
The allegations that credit firms go far beyond FICO scores for credit decisions came in lawsuit filed in federal court in Atlanta by the Federal Trade Commission against subprime card issuer CompuCredit. The FTC contended the firm didn’t properly disclose these practices, BusinessWeek says, in a story entitled “Your lifestyle may hurt your credit.” The FTC suit “offers a rare look inside the opaque business of credit scoring,” the story explains. From BusinessWeek:
It reveals a mechanism that consumer advocates and politicians have long suspected exists—one in which purchasing behavior, not just payment history, matters.
So. Credit card firms spent much of the last decade heavily marketing their products to anyone who could breathe, mass-mailing pre-approved applications to children, dogs, and people who had never paid a bill on time in their lives. They hid fees in the fine print, hiked interest rates on people for reasons they never understood, and piled on charges to consumers who fell behind, keeping them in a permanent state of debt. And now they’re claiming higher moral standards in determining who gets credit and how much they get. Credit card firms as moral arbiters? Has it really come to this?
Apparently it has. BusinessWeek says more financial firms are looking closely at consumer behavior in deciding creditworthiness. Since companies don’t have to reveal the ways they come up with credit decisions, people can’t tell what formula was used to either deny or limit their credit, and they won’t know whether the decision was made in a fair and proper way. We talked about another problem with credit decisions earlier this week, noting that credit bureaus and credit card companies are accused of offering better treatment to powerful and important customers, such as judges and politicians. I wonder if card issuers will monitor those VIPs in the same way.
To see the flip-side of decisions made by credit card companies, listen to stories from people in Granger, Ind., who have turned to a support group for help as they grapple with credit card debts.