Dante has a place for the executives who created this monster. The sooner regulation slays it, the better.

Ethics? I see no ethical behavior in what you describe. Your rationale that it was required by the system, and that anyway your competitors did worse, belies the fact that you and your P&L (perhaps I should say P$L) owners wanted merely to advance their individual careers rather than run a sustainable and growing business that treated all stakeholders with respect.

That said, the execs with P&L responsibility were under incredible pressure to make the numbers, and the company as a whole felt obligated to beat expectations — making, say, $1.02 a share in Q1 vs consensus forecast of $1.01 (when $1.01 was itself a stretch). The result was an almost constant fixation on “revenue enhancement.”

So, over time many, many incremental and seemingly harmless decisions were made, that individually had little impact on consumers but collectively and over time, added up to, in my opinion, abusive or customer-unfriendly practices.

Examples: Over 10 years the statement mail date / to due date time was gradually reduced from up to 30-days to as little as 14 on some products. (I travelled a lot and I even got slammed with late fees by not being able to mail in payments the day I received the statement). The faster the pay, the better the cash flow and lower the interest expense (for the company.

Late fees went from $10 to $39 and in some cases as high as $49. Again, all in small increments.

FX fees went from 0% to +3% (on top of the existing and invisible buy/sell spreads).

Cut off times for posting incoming mail and internet payments went from 4PM to as early as 10 AM (9 AM at some competitors).

A charge for phone payments was instituted.

Binding arbitration (we chose the arbitrator) was put into the T&C.

We stopped mailing changes to the T&C and slipped them into the statement. (Less call center talk time and postage).

We never did universal default, but other companies did and there was some discussion around using it since the poor risks were being pushed off on to us as our competitors raised rates.

And it was all meticulously, mind-numbingly tested, e.g. revenue enhancement strategy “A” yields marginal revenue of $2MM with only a 1 percent drop in customer satisfaction / recommend-to-others scores, and investment of only $500K (6 mo. payback) which is a better ROI than “B” which, etc etc. Consumers did not seem to care (or did not bother reading the 4 pt type).

I could go on. But no one decision was unethical or could be construed as gouging the consumer. No one was thinking long-term, for why should they? Everyone needed to make their numbers and if they did they were rotated out of their job or promoted within 2 to 3 years. If they did not, then they were “exfoliated.” ( I remember many “rank and yank” sessions just before bonus season).

My take: the regulatory problems the industry faces today are the result of the need to please / meet expectations of security analysts and institutional investors and avoid hostile shareholders / financial media coverage. A systemic problem, not one of character or ethics.

I worked for a CC company pushing cards onto otherwise unsuspecting customers while I was in college, and have been screwed over by them several times since in my personal matters. However, despite my general disdain for many of the Industry’s practices, I almost (key word) understand the “usurious”rates charged to many “non-prime” borrowers. As the Administration has made painfully clear, their goal is to maintain/extend credit to all borrowers to keep the economy from going to hell. At the same time, they’ve criticized the CC firms for “predatory” and “unfair” practices. Sure, there’s alot of sleazy fees, but mmore generally, why are we surprised?

The CC firms have to be compensated for the risk they’re taking-on, in the form of annoying fees and seemingly ridiculous interest rates. Does the Gov’t plan on limiting the CC companies returns like they do with public utilities? I’m sure that’d really work out well (sarcasm alert).

Now, excuse my rambling stream-of-consciousness, but I’ve wondered - and if anyone has data on this I’d appreciate it - to what degree, if any, does jacking interest rates actually contribute to consumer delinquency and/or default?

Cheers,

Anal_yst
http://1-2knockout.typepad.com

The interchange rates vary according to the network (Visa, MC, Amex), the country, and the type of merchant. They range from 1% to 3%, so the bank’s overall interchange rate will depend on the mix of spending. The companies I worked for were generally in the 2% to 2.5% range.

For actual Visa interchange rates, see: http://usa.visa.com/download/merchants/a pril-2009-visa-usa-interchange-rate-shee t.pdf

I have a feeling that “unprofitable” customers are purged pretty quickly.

I am a free loader myself but several times over the past few years had to deal with unrequested transferred balances and similar tricks that I assume attempeted to push me into the profitable category with carry-overs and assocaited fees.

One of these was AMEX where I am a 30++ year cardholder and I viewed what they did as totally sleazy. It took e acouple of hours on the phone getting back to the simple monthly charge and pay model.

I am a capitalist but I have no sympathy for the credit card cos - they crossed the line just like the cigarette companies and became a blight on the system.

Bring on national health care and some well-targeted usuary laws.

Good riddance, bad rubbish.

Full disclosure: I am a perfect-payment-history ‘transactor’.