Last week there was an ignorantly hilarious post at the Volokh Conspiracy by Todd Zywicki. Zywicki is opposed to the Credit Card Holders Bill of Rights. Let me tell you about some of the practices the Credit Card Holders Bill of Rights combats. Then perhaps someone can explain to me how - unless he is being paid as a "consultant" or has some other cushy arrangement with banks and credit card companies - Zywicki could support these practices.
Zywicki, who has spent years studying the credit card industry and thus cannot plead ignorance, shares the view that: "Late and over-the-limit fees are unpleasant, but they aren't charged until a cardholder's conduct triggers them."
Let's talk about how "cardholder conduct" triggers late fees and penalties.
* Lie about due dates. Your credit card statement says, in big black print, that your payment is due on May 28, 2009. What it does not say is that it must be received and processed by noon on that date. What happens if Big Bank's mail doesn’t arrive until 12:30 that day? You’re late on a payment.
It doesn’t matter that you sent you letter 5 days ago. It doesn't matter that, right on your credit card statement: Big Bank told you that your payment was due on a day - not a specific time of that day. It doesn’t matter if you have a post mark to prove you sent your letter a week ago. You’re late. End of discussion.
* Delayed processing of payment. You mailed your payment over a week ago. The letter only has to travel a couple of days to reach your credit card company. You’re in the clear, right?
Nope. The credit card company must process your payment. This often takes 3 days to do so. You thus can hit even earnest payers with late fees. Why does it take so long to process a payment? Unless you're a paid industry "consultant," the delay is to generate more late fees. If you're an industry hack, you'd say something about how credit card companies can't afford computers or people to process payments.
* Lost payments. Oops. We didn’t receive your payment. You're late. I sent it. Prove it.
Yes, this happens. There have been lawsuits over this. I have seen smoking-gun memos outlining this practice. The same banks (Bank of America is notorious) who have "lost" payments remain in business. They continue cheating you. Losing payments remains profitable, even subtracting the fines and lawyers fees they occasionally pay.
* Interest rate increase. So these generous credit card companies have made you make a late payment. That's annoying. But just pay your $29 late fee and call it a day. No, no, no.
Because you’ve made a late payment, you’re now a credit risk. That nice interest rate you received when you first bought that credit card must be increased from 9.9% to 13.4% to between 29.9% and 35.6%. As an infomercial would say: Wait, there’s more.
* Universal default. If you’re late on one credit card payment, you’re late on all of your credit cards – even credit cards with different banks. Like wolves, your other credit card companies will increase your interest rate.
How are these practices ethical? How can anyone - outside of being a paid mouth piece - support those practices?