Sunday, July 29, 2007

Predatory lending

We talk about predatory lending in subprime mortgages, but how about in credit cards? What a difference a FICO score makes: On one end are offers for 0% APR balance transfers through December 2007 (with 3% transaction fee, maximum $199).

Then there are offers like this one I happened upon, from a bank that shall remain nameless. Showing through the envelope window it announced:

Contratulations, XXX! You qualify for a Visa(R) Credit Card!"

A fake handwritten insert is the image above. The offer letter begins:

Dear XXX,

You have been pre-selected* for a Visa(R) Credit Card with an initial $500* credit limit! ...

*You have passed the initial screening. You will receive a Visa Credit Card if you continue to meet our selection criteria and meet our income requirement. ...

The disclosure sheet (not even in tiny print) includes:

  • APR - 23.99% (29.99% Late Payer APR)
  • Account Origination Fee (one-time fee) - $50.00
  • Monthly Maintenance Fee - $10.95

They also encourage you to add "Optional Card Benefits" of Express Delivery Service ($20), Advantage membership ($39.95), and credit insurance (72.9 cents per $100 balance per month in CA).

[Begin outrage] That's $50, plus $11 a month, plus options, for a whole $500 credit limit Visa(R) card, APR 24% (or 30%)! The recipient of this letter is supposed to be so excited at actually qualifying for a Visa(R) card that they'd accept this horrible deal, not knowing there are better possibilities?! Like too many stories of sub-prime borrowers.

6 comments:

Mikey said...

The kind of offer only an ID thief would take.

Joey said...

Why must the bank remain nameless

Don said...

Having been on the bad side of a credit score when I lost my house in the last crash, there are even worse deals. Picture all of the above terms, but add in the restriction that the only place the card can be used is at the card-issuer's "store". This deal, would, presumably at least allow the applicant to begin building a new credit history. I doubt the other was even reported to the credit agencies.

Westside Bubble said...

Why must the bank remain nameless

I thought hard about that, and decided that, like no-doc, neg-am, sub-prime mortgages it's more about the system than a particular operator. A website refers to this bank as a "subprime credit card company".

Don said...

So this link gives a number of likely candidates.

Westside Bubble said...

Yup.