Credit Card Absurdities

A story in The New York Times yesterday ("Consumer Bureau Declines to Resist Upfront Credit Card Fees, April 13, p. B1) expressed disbelief that the Consumer Financial Protection Bureau is proposing to allow credit card issuers to charge fees before borrowers' accounts are opened.

That's the kind of ripoff that The Credit Card Holders Bill of Rights, signed early in President Obama's presidency, ought to prevent.

Chi Chi Wu, an attorney at the National Consumer Law Center, describes an  example of what is going on:

First Premier [Bank of South Dakota] began charging a $95 processing fee before the card account was opened, as well as a $75 annual fee. Yet the credit limit on the card was $300.

Comments on the Bureau's proposal are due by June 11.

Meanwhile, James Monaco, writing "Guestwords" in the East Hampton Star yesterday, suggests that credit card companies haven't gone far enough, and that there are still untapped opportunities for gouging consumers. He suggests the following innovative fees:

No-call fee. $9.95 a month for no calls from credit card companies.

Automatic deductions.  $12.95 for each charge.

Paper billing fee. To get a paper bill, pay $17.76 a month, or $24.95 to include a return envelope for payment by check.

Unredeemed fee.  For each month you delay redeeming your frequent flyer miles, $19 per 10,000 points.

These fanciful suggestions are unfortunately not much worse that the reality. Banks for quite a few years have been making more money from fees than from interest rates.