Is Anyone In America NOT Pre-Approved?

Elizabeth Warren over at the intellectually rigorous Credit Slips blog points out the correlation between tightened bankruptcy laws and credit card offers increasingly inundating the American consumer.

In 2005, Congress gave the credit industry what it wanted: tighter bankruptcy laws. In 2006, the credit industry responded by mailing out 8 billion credit card solicitations–up 30% from 2005…

…If debtors have no bankruptcy option, Ronald Mann points out that creditors can keep them in the sweat box longer. Perhaps if bankruptcy were outlawed altogether the mailings would go to 16 billion, and if debtors’ prisons were reinstituted, could the mailings top 25 billion? Ah, the possibilities.

It’s just business. Emboldened by the knowledge that fewer suckers can jump the line, creditors are more willing to bait the hook. — BEN POPKEN

You Are Pre-Approved–8 Billion Times [Credit Slips]
(Photo: amishsteve)

Comments

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  1. XopherMV says:

    That’s the wrong question.

    The question should be, “Why are we still paying the same outrageous APRs after Congress tightened the bankruptcy laws?”

    With less customers defaulting on their credit cards by going into bankruptcy, we should be seeing these APRs go down.

  2. acambras says:

    Not to mention that students receive a TON of these solicitations. Many schools share mailing information with card companies so they can target 18-year-olds, many of whom have little or no income with which they can actually PAY a monthly bill.

    No credit? No job? No problem! Here’s a card with a nice fat limit. Just send us a $10 minimum payment every month. When you graduate and get a nice job, your balance (plus interest) will be waiting for you.

  3. B says:

    If anybody with a pulse can get a credit card, why are there still people who use payday lenders? I don’t think any credit card has an APR of 600%.

  4. Kornkob says:

    Payday lender marketing feeds on particular fears and needs of the working poor and operate in a ‘instant gratification’ manner.

  5. karimagon says:

    @acambras: That’s for sure. I’m one such student: no income, no credit history to speak of, but does that stop them from sending mountains of solicitations– and calling me up ten minutes before I have to go to class to coerce me into signing up for a card? I finally signed up for one card, but I keep that balance at zero and pay it off right away when I buy things. No way am I giving those vampires any of my interest money.

  6. kerry says:

    @acambras: My (small, liberal arts) college had tables for credit cards set up outside the library, by the mail room, and in the cafeteria nearly all the time. I was too terrified of credit to sign up for one, but I can’t fathom how many kids walked out of that school with $130k in college loans and another $25k in credit card debt. Ugh.

  7. acambras says:

    @karimagon:

    Good for you — very smart to pay it off. Then you’re building credit but you won’t be stuck with a lot of cc debt later (like me).

    Even at my graduation walk-thru (where graduating seniors had to go to be fitted for cap & gown, etc.), my college had allowed MBNA to set up a table to sign up students for the alumni association credit card. I think it came with a 20% APR. Oh, and a free t-shirt.

  8. HawkWolf says:

    I always wonder about this stuff. I sent away for a ‘pre-approved’ card (I was getting another card at the time, a totally reasonable thing. I wasn’t in debt, etc etc.)

    I was rejected.

    So, that doesn’t make sense. How am I ‘pre-approved’ anyway? That would mean you are approved before being approved. Or ‘pre-screened’. Why screen someone before you screen them again?

  9. Monica Iceland says:

    A few years ago I took out a magazine subscription in the name of one of my cats. Sure enough, a few months later, credit card offers started coming with her name on them.

    So I guess the answer to the question is, NO!

  10. You-Me-Us says:

    If you hate getting credit card soliciations as much as I do, just take out that business reply envelope, seal it (empty) and drop it in the nearest mailbox. Think of it as a 39-cent unsolicited junk mail fee. And as I’ve said before, I like to think I’m the reason Capital One has to charge 21 percent interest.

  11. Terminixsux says:

    Better yet, put all of the junk mail, sans identifiers, in the BRE before you seal and mail it. Postage is calculated by weight. At one job I recall receiving business reply mail with brinks and blocks of wood. The company still had to pay for it.

  12. CustomersRevenge says:

    Standing out amidst the junky “points” type cards that nail you with fees are decent looking low interest offers. Smart people like us think we might use them to actually make some money, since the rates are cheaper than other debt we might have.

    I tried it once and it turns out that, although they didn’t lie, they set me up to lose money as much as possible and almost got me for a loss.

  13. Nemesis_Enforcer says:

    I paid off all my credit cards and now I get at least 3 “offers” a day. I called to check that my balance was zero on one of my cards(just in case I got a late fee or something cause I paid everything but .03 cents) The CSR was nice she was like I see you have a zero balance would you like to apply for a new card? I was like no thanks I just paid it all off I don’t want to add new debt. She sounded disapointed but then perked up with the “great news” that becuase I have excellent payment history they are going to raise my credit limit by 1000$. I was like didnt you hear me when I said I didnt want anymore debt. But of course they did it anyway…oh well not a biggie but I don’t want the temptation of having a lot of avail. credit.

  14. dohtem says:

    @CustomersRevenge: lol, nice nick.

  15. Charles Duffy says:

    @karimagon: Again, good for you. I avoided all kinds of credit while going to school (paid my own way the last two years… yaay, cheap in-state tuition and local small-business contacts), and when I went to buy a house a bit later found myself hurting because of my lack of history. Getting a card early and always paying it off in full is indeed the right way to go.

  16. dantsea says:

    @HawkWolf: They can get away with the “pre-approved” nonsense because they include something in the true terms and conditions on the application stating that you’re actually pre-screened pending final application review.

    The credit card company buys mailing lists from the credit reporting agencies, who will sell the information filtered any old way you can imagine (“We’d like the names and addresses of all males between 20 – 25 in zip code 94110 with credit scores between 600 and 650 with less than $15,000 in revolving debt,” for example). This generates what is known as a soft inquiry on your credit report (one you didn’t authorize and won’t be penalized for).

    Typically, companies then scrub that list against odds and ends they can find out about you from other marketing database service (catalogs or magazines you receive, who your cell phone provider is — you name it) and generate the mailing list offer.

    You respond to that offer with more detailed information about who you are, supplying employment and income information, along with your signature, which authorizes the credit card company to take a look at your full credit report. They get all information they need, look at your debt to income ratios and other risk factors and then respond with either an approval or a decline. If you’re declined, the final insult to injury will be your credit score dropping 3 – 7 points for the hard inquiry you authorized. Ain’t that a bitch?

  17. SOhp101 says:

    If you don’t want the offers, call the company and tell them to stop sending you offers. Or better yet, call any companies that offer you credit/financial services and tell them that you don’t give them permission to sell your info to ANYONE.

    I now get maybe 1 offer every two months.

  18. mad_oak says:

    SOMEONE FINALLY FIGURED IT OUT!!!! EXACTLY! EXACLTY! The raping of the personal bankruptcy laws wasn’t done to undercut scofflaws, it was done specifically because lenders had MADE A CONSCIOUS CHOICE to ignore any PRUDENT LENDING CRITERIA… Lenders don’t want to manage risk by NOT EXTENDING CREDIT. They have succeeded in managing risk by making it EVEN LESS LIKELY THE LENDER WILL EXPERIENCE A LOSS….. Here… if you’ve read this far, let me share this with you. If you understand the lingo, in a past life I closed these left and right. I hope you are shocked. 100%CLTV, 80/20, 3yr ARM, 50%DTI, STATED INCOME, 6 months reserves. Put that in your pipe and smoke it… Thats insane!

  19. curlyheatherg says:

    Thank you for letting me know about Credit Slips. I’m thrilled that Elizabeth Warren posts to a blog; she is an amazing consumer advocate.