The Next Sub-prime Scandal--Fee Harvesting
November 10, 2007
What's Online
Big Fees for Little Credit
By DAN MITCHELL
SOME issuers of credit cards are “quietly collecting hundreds of millions of dollars in profits selling nearly worthless, predatory credit cards targeting vulnerable consumers, including those with bad credit,” according to a report published this week by the National Consumer Law Center (consumerlaw.com).
How “quietly” these companies are operating may be open to question. But the report states that some companies issue cards with the sole intent of collecting fees from gullible customers — not offering them credit.
A typical example the law center offered was this: a card issued with a credit limit of $250. After a $95 program fee, a $29 setup fee, a $6 monthly “participation” fee and a $48 annual fee, the consumer winds up with “an instant debt of $178 and buying power of only $72.”
. . . law center said CompuCredit’s financial statements revealed that the issuer “collected $400 million in fees from a portfolio of …