I was talking to a high-up marketing type person from Citicards recently and she wanted to know what Consumerist readers were complaining about with regards to the little plastic devil she pushes. She told me how Citicards had recently stopped doing Universal Default, which is where if you’re late on your payments with one creditor, other creditors get to treat you like you defaulted with them and spike your APR. She said she was personally appalled after finding out that her company had the policy in the first place, but then struggled with how to tell customers about it, because, she said, “It’s like telling people you stopped beating your wife.”
(I’m not certain about this one, but I think they only stopped doing Universal Default after the Senate held several hearings investigating some of the worst excesses of the credit card industry…).
I told her readers were complaining about APRs skyrocketing on perfectly good customers. She replied with a story about the Citi Dividend Card was put out with a 5% cashback reward. But the company was losing money left and right, so they had to to pull back and offer only 2%. There was a big backlash, but it was just a bad decision, it should have never been put out to market, she said. I pointed out that while that may be, to a customer it looks like a bait and switch.
I moved on to opaque contracts, some of which the Government Accountability Office (GAO) found in a 2006 usability study to be written at the 27th grade level. I said that these contracts made it easier for the company to control their customers if their customers can’t even understand what they’re signing.
She told me that all the contracts are in fact written at the 7th grade level and that the reason why it has legalese is that it’s written by lawyers.
Oh, ok, that makes it all better then! I didn’t have a computer with me but if I did I would have liked to pull up this section from the GAO survey where a usability consultant tackled the gnarly and inscrutable language in credit card contracts. He took a section from a real credit card contract and rewrote it in plain talk:
- “If at any time during any rolling consecutive twelve billing cycle period we do not receive two Minimum Payments by your payment due date or you exceed your credit limit twice, we may elect to automatically increase any and all of your standard APRs to the Penalty APRs. Your Penalty APRs on all existing an future unpaid balances will automatically revert to the standard APRs disclosed above if you make six consecutive Minimum Payments when due and you do not exceed your credit limit within the same time period”
Here’s it translated from Klepdor:
- “If you pay late or go over your credit limit twice in a year, the interest rate you pay on most things goes up to the default rate, currently 30.49%. It will go back down when you pay on time and do not go over your credit limit for six months.”
The upshot of my talk with the credit card lady is that I think the reason why companies are doing evil things to their customers is because the people making the decisions have become so insulated from the actual effects they’re having on people’s lives. That’s why I’m glad The Consumerist can provide a forum for real people to get their raw stories heard out in the world where they can hopefully pierce hearts and minds.
REFERENCE: Increased Complexity in Rates and Fees Heightens Need for More Effective Disclosures to Consumers [Government Accountability Office] (PDF)