Credit Card Debt: Who's to Blame?

And ‘round and ‘round we go…

Coalition groups have long criticized the policies and practices of the consumer lending industry and certainly in this type of business environment where so many details have a fine line – it’s always good to have some form of checks and balances. Until recently though most of their criticism was covered in newspaper and magazine editorials that aimed to build consumer awareness by providing educational and financial tips to avoid getting hit with penalty fees and rate increases. Well the heat just went up a notch with their recent launch of a series of aggressive print and web ads that compare the effects of “predatory” lending to natural disasters like hurricanes and floods. Yikes. The ad images depict people and families in seemingly dire circumstances – without home or possessions, holing up under patched roofs and dilapidated shacks with a tagline that advises readers of the tragedies caused by burdensome credit card debt resultant to unfair lending practices. Ouch.
Wholly unfounded? Yes, and No.

What the marketing campaign fails to address (and like most industry-bashing forums) is personal accountability. There was an editorial in the Washington Post earlier this week detailing the latest round of senate hearings that have put the nations top lenders under familiar fire and on the defensive once again about fee and pricing policies. A key witness at the hearings was a former Chase cardmember who testified that since opening the account back in 2001, the bank charged him $7,500 in fees and interest over six years in addition to early purchases he made totaling $3,200. $7500? An egregious sum surely. An apology was made to the customer and all remaining debt waived. Many I’m sure will say that Chase should never have charged so usuriously to begin with.

Quite right.

But what the article failed to do was hold the cardmember accountable in any manner. Not that he was entirely at fault but the bottom line is that over a period of five years this particular cardmember was overlimit 90% of the time and also on the "never pay on time/pay every other month/occasionally pay the minimum due" program. It's no wonder he couldn't pay down his balances. Where’s his accountability? Indeed the Bank handled this account poorly – there’s no question. This cardmember was clearly not fit to maintain a line of credit and what the bank should have done was close the account and place it in an assisted payment program where interest rates along with late and overlimit fees are not applied to the remainder of the balance. The assist program would also have negotiated a low, monthly payment amount that fit within the customer’s financial means. In some cases, the remaining balance is also negotiated down.

So there’s no arguing that improvements can and need to be made in the credit-card lending business. There are a number of customer touch points where bank service and account handling need to be better managed. But when you have a business with customers numbering in excess of 50 million - you’re going to come across some very unfortunate circumstances and poor customer experiences. Some situations are beyond a customers control - ‘they happen’; And for some of those I’m sure the resulting financial impacts could have been mitigated with better service management. But I'll also note that the total dollars going back out the door for courtesy fee refunds and interest reversals is in the not so insignificant double-digit millions.

That said, this particular cardmember (and like so many others that run into similar situations) share a HUGE portion of the blame and are equally, if not in many respects more, responsible for getting stuck with “burdensome credit card debt”. Here's a thought, if you experience a brief moment of pause before you decide not to pay your bill, or to pay less than the amount you owe or to make a purchase you know you can't afford - take heed! When you don't cuplability is on you. For people to say or even imply that they don't get it just boggles the mind. I simply cannot believe that stupidity can be that tangible.

I’m not defending the bank or condemning cardmembers – not in the least. But if people truly want to raise awareness – don’t forget to bring the facts from both sides of the relationship. Too many are too quick to place the full weight of the situation in the hands of the bank.