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How Dum Do They Think I Am?

posted by Bob Lawless

As a member of the American Bar Association, I am inundated with offers from companies who have purchased the organization's mailing list. Rarely do these offers make it past the recycling bin in our mailroom, but one last week from Bank of America caught my eye. "CALL NOW TO REQUEST UP TO $50,000," blared the sentence at the top of the letter. $50,000? Wow. Well, if I turned the page over, I found this disclaimer: "Upon approval, we will establish your credit line based on creditworthiness. Your actual credit line could lower than $50,000."

Still, this offer could be a good deal to pay off my bills. Oh, wait a second: "We may prohibit use of this account to pay off or pay down any account issued by FIA Card Services, N.A." Still, as the letter states, "You could also save a bundle in finance charges with a non-variable Annual Percentage Rate as low as 8.99%." That is a pretty good deal, well again until you read this gem in the disclaimers:

"We will set your initial APR between 8.99% and 17.99% based on creditworthiness. . . . We reserve the right to change your APR, fees or other credit terms at our discretion. Additionally, if you fail to pay any minimum monthly payment by its Payment Due Date, we may increase your APR up to a Default APR of 27.99%. . . . 3% transaction fee on each advance (minimum fee $5; there is no maximum)."

Thus, the deal is very different than the misleading rhetoric in big type on the front page of the letter. Bank of America has not at all promised to lend me $50,000 and not at a rate of 8.99%. The offer is to loan me something between $0 and $50,000 at a rate between 8.99% and 17.99%. Also, what is this 3% "transaction fee" for each advance? Do I get 3% deducted from the initial advance Bank of America will send me, or is that for advances after the initial loan? Either way, the transaction fee would substantially raise the cost of the credit to me. In any event, none of it matters, because Bank of America can change any of the terms of the contract at any time, if we can still call such an arrangement a "contract." The offer is not much of a deal at all.

We all get lots of credit offers, but this one was directed at attorneys. Lots of people think lots of different things about attorneys, but no one ever claims attorneys are an unsophisticated and vulnerable population. Bank of America also is not vulnerable and unsophisticated. Based on past experience, it knows who is likely to respond to these sorts of solicitations before they are mailed. If some attorneys fall for these sorts of "deals," then what can we expect for persons who have not been as fortunate to receive an education that trains the mind to critically analyze offers such as this one and to do so with some measure of financial sophistication? The idea that consumer credit transactions are taking place in a market with informed buyers and sellers is just nonsense.


Where are the customers' unions here? There are a great many competitive credit card providers. While well-informed consumers are regretably far fewer than ought to be the case, there are still millions of them. Why cannot someone organize a bloc of consumers to negotitate a credit card deal with strict limits on fees and contract changes, no mandatory arbitration, and sundry other enlightened provisions? If that is already happening somewhere, I would like here about it so I can join. (The actual Consumers Union, publisher of Consumer Report, apparently considers this sort of thing outside their mission.)

Senator Carl Levin (D-Michigan) is proposing such action against credit card companies with the “Stop Unfair Practices in Credit Cards Act.” I suggest we form a consumer coalition and solicit our state senators to act on this legislation in order to reign in abusive cradit card practices...

I like the news paper

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