Excellent program on Frontline today - The Secret History Of The Credit Card - ref Steve Rhodes at blogcritics.org
In typical Frontline fashion, various facets of the credit card industry are explored, with interviews featuring consumers, lobbyists, industry insiders and regulators. The all-important issue of personal responsibility is also discussed with some credit card addicts.
Bill Janklow, erstwhile governor of South Dakota describes how Sioux Falls, SD, became a leading credit card processing center in the United States.
"It's unbelievable, the lack of sophistication that we have as a society to deal with what I'll call consumer credit," he says. "It really is unbelievable. Do I think I helped foster some of that? The answer is yes, I do."
Elizabeth Warren's views are very interesting - she is the author of The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke. She points out that this is the only industry that can retroactively change the price of a product after it is purchased. She cautions that the American consumer might soon reach a tipping point and refuse to put up with usurious terms from the credit industry.
An individual named Yingling who is a lobbyist for the industry has a sinister air - straight-facedly defending the rights of the industry to do whatever they pleased unilaterally. He insists on being the spokesperson for the industry and considers the ending of usury ceilings a good thing for the consumer.
The Office of the Comptroller of the Currency, that regulates financial institutions, weighs in, describing how the OCC can enforce actions against fraudulent practices by banks and large institutions. The Frontline investigation, however, goes on to show how the state Attorneys General are being stifled and limited in their ability to deal with consumer issues by the OCC in a 'turf battle' between the federal agency and the states. The OCC's directive OCC AL 2002-3, is an interesting directive that provides "Guidance on Unfair or Deceptive Acts or Practices"
Banks and their operating subsidiaries should exercise diligence to ensure that, in marketing their products and services, they avoid violating applicable standards concerning unfair or deceptive acts or practices. Failure to comply with statutory and regulatory requirements may lead to administrative actions, including enforcement actions to address violations and to ensure appropriate corrective action; lawsuits; and civil penalties.
These guidelines however are tantamount to requesting a tiger baring its teeth not to eat its prey. Most terms are framed as guidelines, rather than explicit prohibitions.
Article comments
1 - bhw
I missed Frontline tonight, but I heard a portion of "The Connection" on NPR this morning, which covered this topic and interviewed someone who was also on the Frontline show. He seemed to be a consumer advocate.
Credit card companies -- including banks -- are evil incarnate. And middle class Americans who don't pay off their credit card debt are stupid. I realize that many people fall on hard times and start to rely on their credit cards for expenses they normally wouldn't. But most middle class Americans who carry credit card debt just want more than they can afford.
2 - Jim
The first credit card I got, many years ago, was called "The Everything Card." It eventually became Mastercard. It may have been the first non brand specific card ever issued. Anyone else out there remember that one?
3 - INTERESTING
What people don't understand is this;
the banking industries greed is as great as the tobacco companies. They are ripe for Class Action Suits. The "sharks" will eat them for breakfast by challenging the South Dakota Laws of allowing the high interest rates - as usury.
4 - Robert Huber
I hope Andrew Kahr gets his visit from the spirits of Xmas this holiday season. It is hard for me and, no doubt many people, to believe that such individuals exist. Yet, that seems to be the hard facts. Our society is to blame, too. Partly for believing that money can buy happiness. It's can't; it can only rent it. Happiness comes from a focus on the more important things other than money.
5 - d flaherty
Here's the catch 22. The feds help spur the economy by allowing money to be pumped in through credit card purchases on the backs of middle-class America. But what happens when that majority goes bankrupt over the next few years? I guess the credit card industry and Andrew Kahr will have a new line of tricks by then - and with casual look-the-other-way approval from the OCC.
6 - bliffle
Prophetic words, indeed:
"#5 â€" February 1, 2005 @ 23:29PM â€" d flaherty
Here's the catch 22. The feds help spur the economy by allowing money to be pumped in through credit card purchases on the backs of middle-class America. But what happens when that majority goes bankrupt over the next few years? I guess the credit card industry and Andrew Kahr will have a new line of tricks by then - and with casual look-the-other-way approval from the OCC."
And the Fed coppers the bets of the hedge funds.