Wednesday, April 13, 2005

CARD SHARKS

As the bankruptcy bill has been oozing its way through Congress, you have no doubt read many commentaries like this one by Kevin Drum:
A decade ago credit card companies issued cards carefully and charged a minimum interest rate of 12% and a maximum of 22%. Today, "careful" is a thing of the past. Instead of evaluating a potential customer's creditworthiness before issuing them a card, they issue them to anyone with a pulse -- aggressively wooing their business with introductory rates as low as 0%. Then, when these relatively poorer credit risks show even a slight sign of financial distress -- a late car, phone, or rent payment, for example -- the rate can be instantly jacked up to as high as 40% or more.
(emphasis added)
And -- recognizing the blogosphere's rampant use of hyperbole and the inflammatory rhetoric -- you have no doubt greeted such statements as "they issue [credit cards] to anyone with a pulse" with at least some skepticism.

Well, Drum was wrong. You don't even need a pulse to be offered a credit card.

Yesterday, I received a credit card offer in the mail. And when I say "I", I don't mean the cowardly soul cringing behind the purely fictional identity of "Austin Mayor," I mean a bank offered to extend credit to the purely fictional identity of "Austin Mayor."

The only possible explanation I can imagine is that, years ago at a previous address, "Austin Mayor" joined a CD club -- ten CDs for just one cent! -- and "Austin Mayor" fulfilled his commitment -- six more CDs at regular club prices! -- to the fine men and women at Columbia House.

Who knew that sending back those "No Thank You -- I Do Not Want This Month's Featured Selection" post cards could lead to a life of easy credit?

While this credit card company's curious choice indicates that the credit card companies need to get their own house in order before we start ratcheting-up the bankruptcy rules, another aspect of this incident casts the card companies' judgment into further doubt.

This incident also got me pondering the relationship between credit card companies and identity theft. Although I am not particularly worried about identity thieves stealing of my purely fictional "Austin Mayor" identity, I do find it troubling that, in their zeal to issue more cards, the credit card companies appear to blindly send offers out to any address that has a name in any way associated with it -- regardless of the nature or age of that association.

Are credit card companies still sending card offers in your name to the address of your old apartment? What about the apartment you rented in college? Could there be a more open invitation to identity theft?

During the discussion of the bankruptcy bill, the credit card companies have repeatedly cried about consumers failure to pay the debt owed on their cards. But what percentage of that defaulted debt is due to identity theft rather than bankruptcy abuse? And how many instances of identity theft have the lenders themselves abetted through their slipshod, scattershot credit card marketing practices?

It seems to me that these questions need to be answered before we allow the credit card companies to tinker with U.S. bankruptcy law.

Final note -- Of course I shredded the credit card offer. Remember kids:

Update -- This popped up on my RSS aggregator after publishing the above post: A fellow actually named "Austin Meyer" who has written X-Plane, the ultimate (and open source) flight simulator.

And here I am just trying to make sure my html tags get closed.

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