Saturday, February 28, 2009

Lifetime Promotional Credit Card Rates from Chase: Responses

My previous post on Chase Credit Card Services reneging on agreements for low promotional rates prompted several comments, including one from a Chase employee. The comment from the Chase employee is very telling about the mindset of the credit card industry both for what it says and what it doesn’t say. That person wrote:

“I work for Chase Credit Card Services and thought I should inform you that we didn't just announce these Changes in Terms last week. We actually sent notifications to effected card members back in November, so they were informed 45-60 days in advance. If you are going to writing an article from a negative standpoint and try to preach to other people, at least make sure you have your facts straight.”

The commenter is correcting my use of the phrase “last week” twice in my February 16, 2009 post to set the timeline of events. I meant “last week” to refer to the publication of the newspaper articles I cited about Chase’s change to its credit card terms. Instead I made it sound that Chase changed its terms the week prior. Had I published the post in November it would have been correct. I should have used the ambiguous word “recently” which would have left wiggle room in setting the timeline.

This comment is telling in that it doesn’t address the question posed in my post: Whose lifetime was referenced when Chase offered a “lifetime” rate on a balance? As another commenter pointed out:

“If they gave 45 days notice, or just two, it's still false advertising, and a violation of the Truth In Lending Act: the terms of the loan were ‘fixed for the life of the loan.’ ”

But the mindset of the Chase employee is that the credit card agreement allows Chase to change the loan terms at any time, for any reason, as long as a minimum of 30 days notice is given. I believe that is why my use of the phrase “last week” stirred outrage. My usage implied more than 30 days noticed had not been given—a time period I regard as immaterial but to Chase is the only obligation they have under the terms of the agreement.

Like a magician—and many political and corporate leaders—the comment from the Chase employee uses misdirection. Their actions are to holler loud and long about minutiae and hope nobody notices what is actually happening.

As Dr. Robert Lahm commented:

“Imagine that, a company that has previously testified before Congress about playing fair and providing "opt outs" (none exists in this instance) correcting you in getting ‘facts straight.’ ”

Dr. Lahm has set up a protest/advocacy Website to organize consumers to fight against abusive credit card practices. I applaud his efforts to call on Congress to force some semblance of fairness in credit card agreements.

Financial services companies are on the brink of collapse and many blame their failures on consumers. From the point-of-view of financial service providers, consumers spent too much, took out loans they could not afford, and were irresponsible in their use of credit. But, now Chase is disclosing that hundreds of thousands of its customers made rational decisions about credit and honored the terms of the agreement. These customers astutely saw that Chase offered them a loan with a favorable interest rate, borrowed the money and kept up payments under the terms of the loan agreement. Aren’t those the kind of informed, rational, financially responsible customers a credit card company desires? Apparently not.

I have a suggestion for Chase and all the other credit providers. Cut the enticements, the teaser rates, the cash back, the bonus points, the coupons, the gift cards, the air miles, the gasoline credits, the weekly bulk mailings, and all the other gimmicks. Offer consumers a credit card with a reasonable rate interest rate (less than 10%), a credit limit commensurate with income and credit history, and terms of use of that are fair to both parties. Events of the past year have demonstrated that the current business model for credit cards benefits no one.

Joseph Ganem is a physicist and author of the award-winning The Two Headed Quarter: How to See Through Deceptive Numbers and Save Money on Everything You Buy

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