The Database You've Been Waiting For

I'm sure I'm one of about five people who are excited that the Federal Reserve's credit card agreement database is now up and running, but as a bankruptcy professor, you've got to get your kicks where you can. I have no illusions that it will help many consumers understand their agreements. The database will take the state of credit card contracts from laughable to slightly less laughable. Nobody can read these agreements, and that's the point. To top it off, the Fed has managed to organize the database in a way that makes it largely unusable for the ordinary consumer. When you search by credit card issuer, it gives you all the agreements that company uses. If it's a large issuer, that's more than a dozen agreements. And the listings don't distinguish between the cards by card name (i.e., "Double Platinum Rewards," etc.), so the consumer has no good way to tell which one is hers without opening every one. Worse still, an issuer may have more than one entry to search under. For example, CitiBank is listed under both "Citibank N.A." and "Citibank (South Dakota) N.A." How many people know which one holds their credit card?

Why then, you may ask, is it worth having this database at all? There are at least three good reasons.

First, there's the principle. Despite the fact that nobody really agrees to these agreements in any meaningful sense of the word, the law treats them as if they were ordinary contracts and holds consumers to them. At the same time, the agreements themselves are rather elusive. Issuers change the terms regularly, and these changes come in different mailings over periods of months or even years. You have to be pretty organized to have a copy of your credit card contract is one place. Yet I've heard time and again that when consumers call up their credit card companies to get a copy, the issuers never seem to have one on hand. If we're treating these like regular, consensual agreements, the very least we can do is make them available to the people bound by their terms.

Second, it's a goldmine for researchers. I admit that I have a personal interest in this one. It's been nearly impossible to get a hold of these contracts to study what they say. The banks won't share them, and too few consumers have them for rigorous research. With the database, we'll be able to analyze these contracts with an eye to making them better.

Third, it will put certain market theories to the test. According to traditional economic theory, now that the information is available, a few positive things should happen. A small group of informed consumers should start shopping for the best credit card agreements. Another possibility is that consumer advocates will start publicizing which contracts have the most consumer-friendly terms and which have the worst. These developments, in turn, should lead issuers to compete on the basis of contract quality. Will any of these things happen? I doubt it. But at least we'll know.

Comments

[Ketharaman Swaminathan]

I think PriceFight.com and a couple of other websites provide best buy ratings for various consumer goods, not only on the basis of lowest prices, but also considering the online retailer's reputation. This new credit card terms and conditions database makes it possible for CreditCards.com and other financial products recommendation sites to similarly compare various credit card offers not just on the basis of lowest APRs and annual fees but also on how customer-friendly their terms and conditions are. If this information is presented in easy-to-understand manner, I'm sure it will help many people to decide what credit card is best for them. As to difficulty of figuring out which contract pertains to whom, one of these financial product recommendation websites could build an overlay over the basic database in such a way that the customer merely enters the first 6 digits of their credit card, and out comes the appropriate contract for that card. I've seen such a link being established between credit card nummber and the exact type of credit card in www.truecostofcredit.com, so I guess it should be possible.

[Noni Mausa]

Interesting to read this, on the same day Lifehacker is talking about NerdWallet http://lifehacker.com/5549795/nerdwallet-picks-your-best-match-from-hundreds-of-credit-cards?skyline=true&s=i

I'm going to take a good look at what it offers, but it sounds nothing like the database you're chortling over. Makes me wonder if the NerdWallet one is a poor cousin to the Fed's inscrutable database.

God knows I don't understand my credit card contract, and never really did. Is a contract still a contract if a highly educated retired civil servant like me cannot be sure what it really means?

[Michael Anthony Carnacchi]

Three questions for the experts posting to this database:

US BANK NATIONAL ASSOCIATION ND is organized in the State of North Dakota and under Federal regulation as enforced by Title 12 U.S.C. sec. 85; US BANK “may take, receive, reserve, and charge on any loan… interest at the rate allowed by the laws of the State, Territory, or District where the bank is located.”

Under North Dakota State regulation as enforced by the North Dakota Century Code Title 47-14-09(1); “a person… may not take or receive, or agree to take or receive… any greater sum or greater value for the loan… five and one-half percent per annum higher than the current cost of money as reflected by the average rate of interest payable on United States treasury bills maturing in six months.” Then, in N.D.C.C. Title 47-14-09(2)e; US BANK is exempted from the State of North Dakota usury laws.

If US BANK NATIONAL ASSOCIATION ND is exempted from the State of North Dakota usury laws, why then doesn’t Title 12 U.S.C. sec. 85 kick in whereby it reads; “When no rate is fixed by the laws of the State, Territory, or District, the bank may take, receive, reserve, or charge a rate not exceeding 7 per centum.”?

And, for the sake of the next two questions; if I am defending myself in court against a lawsuit brought by US BANK and both the defendant “legal person” and the plaintiff “legal person” are granted “equal protection of the laws” under the Fourteenth Amendment to the U.S. Constitution, why then (in the State of North Dakota), is it illegal for the Michael A Carnacchi “legal person” to enter into contract at a rate above that set by North Dakota law, while the “legal person” who is US BANK is exempted from the same State law and can therefore enter into contract at any rate? Is this a violation of the “equal protection of the laws” granted to Michael A Carnacchi under the Fourteenth Amendment, the very same amendment by which US BANK gained its “legal person” standing in the courtroom?

Thank you 700 billion times for your consideration.