Let’s nip this one in the bud, shall we? Here’s a headline from David Morrison at Credit Union Times: “CARD Act Has Kept Card Interest Rates High, Analyst Claims”. He’s talking about a 16-page paper from Tim Kolk, who’ll email you a copy if you ask him nicely and/or drop my name. But here’s the gist of his argument:
Remember when credit-card companies started cutting back on credit lines because delinquencies were going up and people weren’t paying off their debts? Well, pull out your hankies and prepare to dry your eyes: now they have the opposite problem. Harry Terris at American Banker has a classic headline today, “Card Payment Rates Stymie Lending”.
Almost everybody interested in extending banking services to the unbanked and underbanked is looking very closely at prepaid debit cards. They can do much of what checking accounts do, without the unpredictable fees, the annoying hours, and the general feeling that if you don’t have a lot of money you’re not welcome.
There’s a new credit card out there, called Barclaycard Ring, which manages the rare feat of being a good, solid financial product even as it’s also incredibly gimmicky. It’s being branded as “the first ever crowdsourced credit card” — a financial product “built on a community” which, by the looks of the stock photography on the website, is full of incredibly happy, healthy, outdoorsy types who live only in bright sunshine. You don’t just apply for this thing, you “join the conversation”.
Well done to Joe Nocera for giving some well-deserved publicity to Jeff Horwitz’s fantastic (and still ongoing) investigation into the way that banks encouraged debt collectors to sue Americans for credit-card debt they didn’t owe.
Dan Freed has an amazing story today about credit-card interchange fees — the ones that weren’t touched at all by the Durbin amendment in the Dodd-Frank bill. But it turns out that the courts might yet prove even tougher than Congress: various suits working their way through the legal system could end up costing the banks hundreds of billions of dollars in settlement costs — plus a reduction of interchange fees to something approaching international norms.
Jeff Horwitz has an astonishing story about Chase’s credit-card collections efforts, which look as though they’re riddled with sloppy record-keeping and even possible fraud.
I could really do with a lot more transparency from the Fed on why exactly it’s decided to almost double the maximum permitted debit interchange fee. The bank lobby certainly had a lot to do with it — but the bank lobby always said that the Fed was simply doing what it was forced to do under the Durbin amendment to Dodd-Frank, and that therefore Dodd-Frank itself had to be changed.
Dick Durbin’s bodyslam of Jamie Dimon on the subject of debit interchange is, simply, a must-read. If Durbin ever had any dreams of a cushy sinecure on JP Morgan’s board, those have surely now been quashed forever — but being able to write a letter like this on official US Senate letterhead makes it oh so very worth it: