Group aims at credit predators

WASHINGTON -- A national consumer advocacy grouping called on United States Congress Thursday to go through statute law halting the growing of a particularly insulting type of recognition card that marks vulnerable consumers with mediocre recognition histories.

Advertised on telecasting and elsewhere, so-called "fee-harvester" card game are heavily marketed to subprime borrowers who can't obtain traditional recognition cards.

The card game offering little recognition bounds -- usually respective hundred dollars -- but when issued, cardholders immediately incur a figure of high fees that tin eat up nearly 80 percentage of the available credit. While card companies harvest 100s of billions of dollars in fees, consumers have only a follow of credit.

A new study Thursday from the National Consumer Law Center establish that the card game often have aggressive debt-collection operations, bait-and-switch offerings on recognition bounds and card terms, and delusory add-ons such as as "credit protection" and unwanted ranks in traveling and diners clubs.

One card, offered by South Dakota-based First Prime Minister Bank, characteristics a $250 recognition limit, but new cardholders are automatically hit with a $95 programme fee, a $29 business relationship set-up fee, a $48 yearly fee and a $6 monthly engagement fee. That's $178 in contiguous debt, which go forths only $72 in existent credit.

"No 1 in their right head would hold to pay $178 so they can borrow $72," said Joe Ridout, a consumer services director for Consumer Action, a non-profit-making instruction organization.

Willard Ogburn, the NCLC director, said the pattern is "technically legal, but morally indefensible."

Several phone calls seeking remark from First Prime Minister weren't immediately returned.

One card issuer, CompuCredit of Atlanta, collected $400 million in fees from the card game last twelvemonth and by mid-2007 was owed $973 million in similar fees. The company spent some $160 million selling its card game on the Internet, through mailings and by other means, said Crick Jurgens, a NCLC consumer advocate.

The study faults the growing in "fee-harvester" cards on slack ordinance of the fiscal industry and on federal legislative acts that pre-empt say vigorish laws designed to forestall insulting and predatory loaning practices. Jurgens called on United States Congress to get rid of pre-emptive codifieds and to ordain laws that bounds recognition card fees, involvement rates and terms.

Lynn Strang, a spokeswoman for the American Financial Services Association, the national trade grouping for the consumer recognition industry, said the organisation back ups attempts to guarantee clear revelation of recognition card footing and opposes insulting card practices. But she added that the AFSA opposes compulsory caps on recognition card involvement rates and fees because loaners necessitate flexibleness to put rates based on risk.

Strang said the card game can assist consumers reconstruct their recognition histories and added that "if there was no value in them, there would be no marketplace demand" for them.

Smaller banks, such as as First Premier, First Depository Financial Institution of Delaware and Applied Bank, formerly known as Cross Country Bank, typically specialise in fee-harvester cards. But big recognition card issuers, including Capital One and HSBC, also have got issued card game with similar concern models, the study found.

In improver to the burdensome use fees, advocators said fee-harvest cardholders are likely to incur further fees for exceeding their light recognition limits. Applied Depository Financial Institution charged a $100 fee just to increase the recognition limit, Ridout said.

Jurgens told the narrative of Dennis Gabor Marsi of Akron, Ohio, who obtained a card from Capital One after filing for bankruptcy owed to medical expenses. After paying a $50 application fee, Marsi received a card with a $200 recognition limit. He declined a card offering for a "diner's club" membership, but after his married woman used the card to purchase a $130 babe crib, the couple establish they had been billed $99 for the diner's baseball baseball club membership.

This caused them to transcend their recognition limit. The couple lesion up paying $700 to finance the crib. They're now in a lawsuit with Capital One, which claims the household owes $3,500, Jurgens said.

Tatiana Snead, a spokeswoman for Capital One, said the company couldn't notice on the Marsi lawsuit owed to pending litigation. But she said the study doesn't reflect Capital One's concern practices.