Word: issuers
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Last year, you see, when McNamara was doing things the conventional way, the credit-card issuer, Chevy Chase Bank (whose portfolio has since been acquired by the First USA unit of Bank One), slapped him with four $29 late fees even though he regularly mailed his check two weeks before the due date. McNamara figures not even the Postal Service could screw things up that consistently, and he's convinced the bank purposely delayed processing his bills, a charge Chevy Chase denies. "They use low introductory rates and send cards to anyone and their dog," says McNamara, "and they have...
...rigidly enforcing grace periods on bill payments, upping foreign-transaction fees and imposing penalty interest rates of 20% or more. Some bewildered customers are being punished for not charging enough (inactivity fees). And even if you pay your MasterCard, say, but fall behind on your Discover charge, the MasterCard issuer might raise your interest rate, because you're deemed a greater credit risk...
Meanwhile, a similar suit has been brought against First USA, the No. 1 credit-card issuer with 45 million accounts, for deliberately "delaying posting of customer payments in order to charge late fees and penalty interest"--an allegation the company denies. First USA's alleged trick was to mark statements as arriving on time only if they were received by 8 a.m. of the due date. The company has since changed that time--to 10 a.m. In San Francisco, Providian Financial faces lawsuits for allegedly billing customers for services they didn't want, like credit insurance. Providian says the charges...
...United States, every aspect of the financial services is dominated not by a bank but by a focused, non-bank with national scale. For example, MBNA is the largest issuer of credits cards. Fidelity, a mutual fund company, and Charles Schwab, a stock brokerage, dominate investment instruments. CountryWide commands the lion's share of the consumer mortgage market...
Here's a sign the economy may be in real trouble: the baby boomers, legendary for their spending and borrowing, are slipping into debt hell. And at least one major credit-card company is starting to feel the heat. Advanta, the nation's ninth largest issuer of plastic, stunned Wall Street last week by forecasting a loss of $20 million in the first quarter. The company relies on a computer model to pick more affluent customers, who are offered a large credit line and teaser rates as low as 5.9%. The result: the number of cardholders jumped from 2 million...