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REAL ESTATE'S NEW RULES: Get key insights into home buying and selling in SmartMoney's new e-book.

Published March 3, 2009 | A A A

SmartMoney Magazine by Nancy Nall Derringer (Author Archive)

10 Things Credit Card Companies Won't Say

1. “We’re just waiting for you to screw up.”

Many things can bump your credit card interest rate into the red zone, but nothing faster than what’s called “universal default.” You can make all your credit card payments religiously and for a long time, but fall behind on your electric bill and, suddenly, you’re a deadbeat—who will be charged accordingly. Rates can change on short notice, from low and reasonable to up to 35 percent.

Card companies claim that what they’re doing is managing risk. Consumer groups disagree, since many people in universal default aren’t deadbeats by any reasonable definition. Say, for example, you’re disputing a charge on a medical bill or waiting for an insurance snafu to resolve itself. If a billing clerk kicks it to collections, you’re in universal default. Or suppose your credit score drops—a common event that may be entirely unrelated to your billpaying behavior. That’s also likely to push your interest rate higher.

The best way to avoid the problem is the most obvious: Pay your bills on time. Bankrate.com, a consumer-lending education website, further advises that if you have a disputed bill, resolve it before it reaches collection status.

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User Comments

Posted: 5:46 PM EST May 19, 2009

grinwithin

2 Comments

Bpstreet: Looking back, I can see where things went a little 'ungrounded' but realize often times when responding, I take phone calls, and unfortunately do not typically have 100% focus and I just hit send without proofing the thoughts. It is my intent to clarify some of the points you have made.

Your specific example quotes "absolutely no criteria for screening employees". You sound like you are somewhat educated so can you tell us how you know that all non-bank lenders do not screen?
The point is that Banks are regulated and required to screen employees in order to do business. These requirements are Federally regulated and if they do not comply, there are clearly established consequences. When an employee is being hired by a bank owned entity, credit reports are run, background checks are completed, and the employee is fingerprinted. The point is that during the hiring process, they are looking for red flags in the prospective employees background that may indic...(Read more of this comment)ate a bank customer's sensitive information may be at risk. You can learn more about the pre-employment screening with bank owned entities at the FDIC website.
Federal Agencies that establish and distribute various forms of ID including Social Security cards, Passport's etc. Are all subject to even more stringent background checks and depending on the level of information, the employee will go through different degrees of clearance such as For Official Use Only, Confidential, Secret, Top Secret, etc.
When it comes to third party lenders, collection agencies, the credit reporting agencies, and any other entity that does not have a direct financial obligation to the Federal government (Bank's are insured by the FDIC - therefore there is a financial obligation) there are no specific regulations or guidelines making this a requirement.
You say a bill collector works for a bank, yet this is not always the case. Many times a bank sells the bad debt and a debt buyer will purchase that list in an effort to collect and earn profit. In any event, the collector is subject to FDCPA laws protecting consumers, but if you look across the board - there are hundreds of disreputable collection agencies out there that are nothing more than a new breed of La Cosa Nostra. I would check out various websites such as Budd Hibbs for 'collection agency watch lists'. Look up consumer reports on various agencies and you will quickly see who is reputable and who is not. It is my point that there needs to be a checks and balance in place to hold someone accountable and actually have a way to enforce those laws.
A good example is a woman I know who is taking care of her god-daughter for a few months because both of the teenager's parents are military and unfortunately both deployed at the same time. The daughter, in my friend's care, started receiving a number of phone calls from Harvest Strategy on her cell phone. The kid answers the phone and Harvest Strategy asks for one of the parents. She tells them they are both deployed and she turns the phone over to the guardian. The guardian learns about a bill from Citibank, the guardian requests they stop calling the child and she will look into the bill when she speaks to the parents. The parents confirm they have no knowledge of any Citibank bills. The friend calls Citibank, Citibank says they don't have any record of any bills in collection under social's and they claim they have no affiliation and Harvest Strategy does not represent them. The friend writes to Harvest Strategy providing a copy of the Citibank letter confirming the conversation and the bill goes away. Three weeks later, it starts over in the State of NJ with Central Jersey Adjustment. Same dispute, same letters and a request to stop calling the kid. Three weeks after that it pops over to Nationwide Collections crossing another state line to Florida. Someone is passing on the information to harass these deployed soldiers and their teenage daughter and circumventing the Federal Banking Laws enforced by the Comptroller of Currency by forcing the initiation of investigations at the State level.
So when the collector is calling, and they have the wrong person or some other issue where it is not a collectible debt, who is responsible ultimately for sending that personal information to that party?
In my own case, I had a debt appear in 1999 from Discovercard on my credit report. I called Discovercard to question the debt as I never had a card with them. I was told it was a pre-approved post card offer of credit in my name that was sent to an address I had moved away from in 1996. They asked for indentifying information and I gave them my social, mother's maiden last name and some other challenge questions. They claimed they could not talk to me because I could not answer the challenge questions correctly. At their request I sent a copy of the derogatory trade line on my credit report and a copy of my driver's license/social. The bill went away until 2004. My personal information was provided to a junk debt buyer illegally posing as a law firm. They actually stalked me at my place of employment and followed me home making threats and one joker assaulted me demanding money. Needless to say the physical contact resulted in police activity. My employer relocated me to a satellite office for my protection and the guy claiming to represent Discovercard showed up at my elderly mother's home waving a gun in her face threatening to have me arrested and lose my corporate career. My mother wound up in the hospital with chest pains and this resulted in the arrest of this lunatic. Discovercard sent a letter apologizing for the 'mistake' admitting the bill belonged to someone entirely different, but was found not responsible for the terroristic threats suffered as a direct result of their release of personal identifiable information to a third party. They were also found not responsible for the collection activities supported by the collection agency. The State Attorney General closed Weltman Weinberg and Reis down and they are not legal to do business in my state (as well as 12 other's). In the remaining states where they have not lost their State licensing and bonding, they are still alive and well harassing folks.
Either the States need to work together to abolish this example of consumer abuse, or the bank's/original creditors need to be held liable. If the original creditor is not liable for the conduct of whom they do business with, it is not necessarily foremost on their mind to do business with the most reputable with integrity, but the most cost effective that makes the most promises. When you have this type of illegal business practice, you attract the predators that would be more likely to use personal information illegally they collect from the consumer.
I do agree that consumer's who legitimately owe, need to pay. What has me irked beyond all belief is the way personal information is lost, abused, and not regulated across the board.
Another specific example is another military person who I assisted in the capacity of a volunteer credit advocate whose security clearance was in jeopardy as a result of false information that was appearing on his credit profile with Trans Union. I assisted this guy with analyzing the Trans Union report he was provided, and it was determined that his 'overextension' of credit and 'living beyond his means' was a direct result of mixed filed. His father's information, (who had the same name) and his brother's information (same first initial) were combined with his.
As we were looking to expedite this correction, we contacted CEO David Emery who requested a copy of his lease proving a physical address, a copy of his military ID, copy of the social security card, copy of a drivers license. This information was mailed Fed Ex, signed for, and received by Trans Union. On follow up the documentation was lost. David Emery was questioned about the security procedures and how the personal identifiable information was utilized and stored. Needless to say, we forwarded all documents to JAG and Trans Union has been issued a summons and complaint.
(Show less of this comment)

Posted: 11:43 AM EST April 28, 2009

Posted by: bpstreet

grinwithin: Wow, good detailed analysis. I am a retail food small business owner with some experience in this area. I actually need people to pay their bills so that I can stay in business. And when they do not, I layoff and I cut back (so I guess I contribute to the recession -- but so does the person who does not pay their bills, because that puts a strain on me and others like me). I think you make some really good points and some really bad un-grounded points. Before making some huge comments on specific companies or groups of companies, it would be nice for you to research accurate sources and share truthful information. An example would be you mentioning a non-bank lender and them having "absolutely no criteria for screening employees". You sound like you are somewhat educated so can you tell us how you know that all non-bank lenders do not screen? Perhaps what you are trying to say is that you know of one or some that have somewhat lacking screening processes -- but I would f...(Read more of this comment)ind it hard to believe that you know every company's screening process. In the case in Buffalo, the collector is not a "non-bank lender" it is a bill collector. These bill collectors work for banks, credit card companies, utility companies, car dealers, government tax offices, medical offices, etc., etc. They do not just work for a bank. Do not single out a bank as a cause. I completely agree that these collectors should be screened, but that obligation falls on all that use them. In most cases, if the victim can prove that the loss was as a result of a specific company's negligence, then they can collect restitution. Again, I emphasize that banks can be at fault here if they do not do their due diligence, but so can any company that hires a collector. If a bank is at blame, then they need to be held accountable. I have a problem with you jumping on the band wagon to dump on banks when the examples you use involve many different types of companies and industries. I trust that you are leaving the same feedback on other message boards calling out everyone/every company -- again, banks, credit card companies, medical offices, hospitals, etc. -- you know, every company that collects money from people for services rendered or products sold, and when the person does not pay, the company tries to collect. Some of these debtors are really in need because of some unfortunate circumstances in their life like job loss; however, some of these people knowingly spend more than they can pay for and then do not pay. Who is the victim in this situation?

So, all credit reporting agencies do not have any requirements to screen employees? Really? You know this how? I actually use credit reporting agencies in my business and have it in writing that the ones I use do criminal screening. Maybe when you say "screen employees" you are talking about screen for drug use or past employment or education or personal references or last known address. "Screen" is a word in the hiring process that is quite large and involves many steps. Again, you are not specific in your comments, so I am assuming you are speaking of criminal screening for these credit agencies.

Your last point involving BOA, is unclear. I am not really sure what you are saying. I think you are mentioning that perhaps their is some phishing going on. Phishing is a huge problem that all companies involved with lending money or collecting any type of personal information must do more to combat. These fraudsters will attempt to get your information in many different ways so that they can steal from you. Everyone involved needs to be stronger and do more to prevent this from happening.
(Show less of this comment)

Posted: 9:44 AM EST April 28, 2009

grinwithin

2 Comments

Credit card companies are a major contributor to the decline of the economy.

First, banks are required to fingerprint and bond employees. These employees are required to participate in training to protect your information and when they "drop the ball" they individually are the scapegoat for the organization. When dealing with non-bank lenders they have absolutely no criteria for screening employees. What I think should change is holding the bank accountable for information they supply to third parties such as collection agencies.

In one case up in Buffalo NY, a bill collector solicted a debit card from consumers to pay a legitimatye past due debt. The agency, not required to screen employees, hired an ex-con who wound up using consumer debit cards fraudulently. This happened last year in Fall 2008. Frankly, since the bank provided this personal information putting the consumer at risk - they should be obligated to pay restitution. It might make them a littl...(Read more of this comment)e more cautious about who they provide information to and how that information is used.

Credit reporting agencies also DO NOT have any requirements to screen employees. On a personal note, I have communicated with the President of Trans Union (David Emery) because the organization admits to losing sensitive information including copies of a social, lease, driver's license, passport, military ID. All of the agencies seem to "lose" information which has a number of groups concerned about what happens to that lost data and whose hands is it in?

Delaware is a big problem. Even when you write to the department of banking, you will get the run around. Best advice is to know the laws under FCRA, FCBA, and FDCPA and call them on the carpet.

Banks helping ID theft is another problem. As recent as August 2008, Bank of America's helpful representative contacted a vendor who did a test charge on an old fraud account for $1.95. The woman so helpfully asked him to use my current account number - where charges were detected the next day for $4.95 and a third $499.99. The company website had a physical address listed in Cypress (a known hot spot for laundering money) and the toll free number was disconnected. A few weeks later the website disappeared.

In another instance, it seems that thousands who monitor their credit have been reporting an Client Services in St Louis, MO for making unauthorized inquiries into their credit and within a few short weeks the claim to have opened a line of credit on behalf of Bank of America. When you call Client Services to question the trade line, they phish for personal information and claim that the account is "past due" and they are collecting it. When you tell them you don't know anything about the account and ask for proof of the debt, they start double talking by saying hte only way you can get the information about the account is to give them personal information. They put the pressure for you to give them bank account info, credit card info, etc. On the surface it would sound legit, but a well educated consumer knows that they can easily pull your files based on the information they reported to any credit reporting agency.

Many consumers contacted Bank of America directly. The Bank has insisted they have no affiliation with Client Services and in many reported cases, no record of any account number, dollar amount or any other account for that consumer. Unfortunately Bank of America feels their branding is not in danger and they will only work with authorities if compelled to do so. They will no tinitiate any investigations or get involved with protecting consumers whether they are clients of the bank or not.

The St. Louis Attorney General is seeking reports from consumers against Client Services and have told me they are looking to prosecute to the full extent of the law. (Show less of this comment)

Posted: 3:13 PM EST March 28, 2009

chaswright

1 Comments

In 2004, Smart Money recommended Advanta Bank as the best credit card to own for a small business. Following your advice, I opened an account with them. Despite a perfect payment record, Advanta has been nothing short of predatory, raising my initial interest rate from 7.99% to 29.99%. Before recommending another card, I would advise Smart Money to do their homework. A quick internet search of Advanta turns up thousands of complaints into practices that in other times would have been defined as usury. Needless to say, I will be doing a lot more of my own homework should I ever want another business credit card, rather than rely on your magazine.

Posted: 12:27 PM EST March 20, 2009

m8182

1 Comments

I realize that many people may not be very conscientious, but credit card companies are the lowest of the low in my eyes.

I have never missed a payment, paid late, exceeded my credit limit, etc on any credit card bill or other bill.

I am a diligent consumer and research everything that I do extensively, including obtaining credit cards... I only go for fixed, low rate credit cards. I carried a balance of about $5,000 at 0% for many years - I kept shifting around the debt, paying off other higher interest rate secured loans. About 2 years ago, a contractor stole a little over $30k from me, without completing the work. Because of this, I had to repair holes in my house (literally), buy supplies, etc. and funded this with credit cards, as my second mortgage had been stolen and I had not budgeted for this sudden loss. Also, a fixed rate of 3.99 or 6.99 was basically equivalent to a home equity line, or so I thought.

Several of my credit cards, specifically: First...(Read more of this comment)

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