AFSCME 3357-HOF'S BLOG

Credit Card Expert on NPR's Fresh Air

Elizabeth Warren, a Harvard Law professor was the guest yesterday on NPR's Fresh Air Program. The streaming version is linked here. Some of the highlights: She stated that for a young couple who charges $5000 in expenses for a new baby (crib, high chair etc) and only pays the minimum payment, that baby will have grown up and had a child of his/her own by the time that $5000 is paid. On average, the amortization period is 34 years at the minumum payment amount. She said that credit card solicitations are up 30% since the new bankruptcy law was passed, and most of these new solicitations are aimed at people with blemished credit. Professor Warren also suggested that credit card companies are intentionally charging bogus fees. Her proof of this is indirect. She states that the errors have a single-tailed distribution. In other words, it's evidence of the intentional imposition of erroneous charges that the errors tend to unwarranted charges compared to errroneously ommitted charges.

Professor Warrern talked about practices in handling payments that are at least sharp dealing. She points out that for customers on the East Coast, credit card companies direct their payments to a small town in the west, therefore increasing the mailing time, and maximizing the amount of late fees. There are stories of companies intentionally delaying posting of payments and actually shredding incoming payments.

Like James Spurlock's film Maxed Out (which is currently going into wider distribution), Professor Warren highlights the extreme lobbying by the financial industry. Also both sources discuss the "race to the bottom" amoung states lowering their regulations to make themselves more attractive to credit card companies.