Growing Profit Source for Banks: Fees From Riskiest Card Holders
When Jennifer Reid opened her credit-card statement in April, she discovered how expensive it was to make full use of her credit.
The 42-year-old X-ray technologist had run through $10,000 of her $12,000 credit line on an MBNA Corp. card. In April, her annual interest rate abruptly jumped to 24.98%, up from 19.98% the prior month and far above the initial single-digit rate.
"I don't understand," she recalls telling an MBNA customer-service representative on the phone, complaining that she hadn't been late with a single payment. The representative agreed but pointed out that she had run up more than $5,000 of debt on two other cards. Also, she was making only slightly more than the minimum suggested monthly payments on her MBNA card. He said the company now saw her as a credit risk and feared it would take her forever to pay off her debts. "Isn't that what you want consumers to do?" she snapped back.
That's a question more financially strapped bank customers are asking these days. For consumers who pay off their credit-card balances each month, shop aggressively for interest rates as low as 0%, and take advantage of generous credit-card rewards programs, consumer credit has never been cheaper. But for others like Ms. Reid, who went into debt so she could move to a better job in Florida from South Carolina, the trend is in the other direction.
Card users, consumer advocates and some industry experts complain that banks are attempting to squeeze more and more revenue from consumers struggling to make ends meet. Instead of cutting these people off as bad credit risks, banks are letting them spend -- and then hitting them with larger and larger penalties for running up their credit, going over their credit limits, paying late and getting cash advances from their credit cards. The fees are also piling up for bounced checks and overdrawn accounts.
"People think they are being swindled," says industry consultant Duncan MacDonald, formerly a lawyer for the credit-card division of Citigroup Inc. Penalty fees aren't new, but they are becoming more important to the industry's bottom line and are being borne by the people who can least afford to pay them, he contends.
Cardweb.com, a consulting group that tracks the card industry, says credit-card fees, including those from retailers, rose to 33.4% of total credit-card revenue in 2003. That was up from 27.9% in 2000 and just 16.1% in 1996. The average monthly late fee hit $32.01 in May, up from $30.29 a year earlier and $13.30 in May 1996, the company said. In 2003, the credit-card industry reaped $11.7 billion from penalty fees, up 9% from $10.7 billion a year earlier, according to Robert Hammer, an industry consultant.
"As competitive pressure builds on the front-end pricing, it has pushed a lot of the profit streams to the back end of the card -- to these fees," says Robert McKinley, chief executive of CardWeb .com. Over the past two years, he said, "it's become much more aggressive." At industry conferences, he notes, talk often turns to "what the market will bear."
Banks say that penalties and fees are a necessary component of new models for pricing financial services. Gone are the days when banks collected hefty annual fees on all credit cards and charged fat interest rates to all customers. Now, the banks say, they must rely on risk-based pricing models under which customers with the shakiest finances pay higher rates and more fees.
"We look at teaser rates as an area that we have to be competitive in," said Richard Srednicki, a top credit-card executive at J.P. Morgan Chase & Co., during a conference call with investors last fall. He said the bank tries to "mix and match how we compete" on interest rates and fees "in order to make the kinds of returns that we're looking for."
An MBNA spokesman declined to comment on Ms. Reid's experience but noted that one of the most important considerations in setting a credit card's interest rate is "how a customer manages his account." If a customer's financial circumstances change for the worse, he said, the bank has to raise the rate "as a way of balancing that greater risk."
Such variable pricing has been embraced in recent years by airlines, mortgage lenders and others. What raises the hackles of bank customers, however, is that many don't discover the rate changes and penalty fees until they have already been hit with them. Those who complain are directed to disclosure statements that most consumers never read. These disclosures, says Mr. MacDonald, have ballooned from little more than a page 20 years ago to 30 pages or more of small print today.
Federal Comptroller of the Currency John D. Hawke Jr., one of the nation's top bank regulators, warned bankers at a conference last fall that "no retail banking activity generates more consumer complaints" than credit-card practices, "and where there are persistent and serious complaints, there is a fertile seedbed for legislation."
Mr. Hawke raised the case in which a customer presents a credit card at the cash register and the bank approves the transaction even though it knows that the purchase will push the customer over his credit limit. "If, as a practical matter, the line has been increased, is it unfair or deceptive for the creditor to continue to impose an overline 'penalty'?" he asked.
Until the early 1990s, most banks offered one main credit-card product. It typically carried an annual interest rate of about 18% and an annual fee of $25. Cardholders who paid late or strayed over their credit limit were charged modest fees. Profits from good customers covered losses from those who defaulted.
Then card issuers, in an effort to grab market share, began scrapping annual fees and vying to offer the lowest annual interest rates. They junked simple pricing models in favor of complex ones they say were tailored to cardholders' risk and behavior. Eager to sustain growth in a market approaching saturation, they began offering more cards to consumers with spotty credit.
By the late 1990s, banks were attracting consumers with low introductory rates, then subjecting some of them to a myriad of "risk-related fees," such as late fees and over-limit fees. A 2001 survey by the Federal Reserve showed that 30% of general-purpose credit-card holders had paid a late fee in the prior year.
Like Ms. Reid, more customers are seeing red when they discover the penalties on bank statements. Credit-card late-payment charges have risen to as high as $39 for some customers of Bank of America Corp., MBNA, and Providian Financial Corp., and fewer banks grant grace periods. Cardholders who exceed their credit limits face "over limit" fees as high as $39 a month.
In a survey of 140 credit cards this year, the advocacy group Consumer Action said 85% of the banks make it a practice to raise interest rates for customers who pay late -- often after a single late payment. Nearly half raise rates if they find out that a customer is in arrears with another creditor.
Since the banks disclose the fees in the fine print of their mailings, they have had little to fear from regulators and the courts. Consumer lawyers have lost a string of lawsuits challenging such practices. A little-noticed April ruling by the U.S. Supreme Court said credit-card companies don't have to include various penalty fees when they calculate the "finance charge" listed on a customer's monthly statement.
And bank regulators have been reluctant to promulgate new regulations. The Federal Reserve Board and four other regulatory groups recently disappointed consumer groups by failing to take a strong stand against "bounce protection" plans. These programs allow customers to overdraw their checking accounts in exchange for a fee each time they do it that can exceed $30. Critics call bounce protection little more than an expensive short-term loan since the overdrawn amount must be covered quickly.
Banks are charging as much as $32 per transaction when customers write a check or make a debit-card purchase without enough money in their accounts to cover the payment. Five years ago, $20 was more typical.
Alicia Flynn, who works in the billing department of a San Francisco hospital, used her Bank of America debit card on Jan. 28 of last year to make four small purchases, including a $2.27 cup of cafeteria soup. But several checks she and her husband had written also hit their account that day. When the bank tallied up the account later that day, it posted some of the checks before the debit-card charges, which had already been cleared at the register. That left the account overdrawn by $40.17. The Flynns were hit with separate $28 "insufficient fund" fees for two checks and all four debit-card transactions, hitting the maximum daily penalty of $140.
"It is somewhat like having a meter maid put five parking citations on your car for one parking violation," complains Mrs. Flynn's husband, Richard Flynn.
Mr. Flynn later learned that subtracting the biggest check first is standard procedure for Bank of America. In response to his complaint letter, a Bank of America representative enclosed a copy of a booklet she said every customer received when opening an account, and directed Mr. Flynn to page 54. It describes the policy and warns customers that "this method may result in additional overdraft fees."
A bank spokesman maintains that most customers want large checks to clear first because they tend to be for important items such as a rent payment. The $28 penalty fee, he said, is intended to "make sure that customers don't run their balances so close to zero," and is priced "to assign a cost of the risk it exposes the bank to."
Banking fees have long been a subject of legislation and litigation. One decision that has helped banks boost their penalty fees came in 1996, when the Supreme Court said states can't regulate such charges if they're levied by out-of-state banks.
The 1968 federal Truth in Lending Act was enacted to promote "awareness of credit costs on the part of consumers." It required "meaningful disclosure of credit terms" but didn't say anything specifically about credit-card fees. In the act, Congress directed the Federal Reserve Board to enact regulations. The Fed responded with Regulation Z, which requires credit-card issuers to disclose the cost of credit as a dollar amount, known as the "finance charge," and as an annual percentage rate. Fees for late payments and the like were not to be included in either calculation.
As a college student in the mid-1990s, Sharon R. Pfennig signed up for a card with a $2,000 credit limit. In 1997, buying clothing at a mall, she blew past her credit limit by $192. Household International Inc. began tacking on a $20 over-limit fee each month. Ms. Pfennig stopped using the card and continued to make her $45 minimum monthly payments. But the monthly penalty fee, coupled with the $35 to $40 she paid each month as interest on her debt, caused her balance to continue climbing. Her monthly over-limit fee then jumped to $29, and her fee total eventually ballooned to about $700.
In 1999, Ms. Pfennig filed a lawsuit in Ohio federal court against Household and MBNA, which had purchased the Household credit-card portfolio that contained her account. The lawsuit accused Household of misrepresenting the true cost of credit by not including over-limit fees in its disclosed "finance charges" on her monthly statement. The suit said this practice, which adhered to Regulation Z, nonetheless violated the Truth in Lending Act.
An appeals court agreed with Ms. Pfennig but the Supreme Court, ruling April 21 of this year, sided with the credit-card company. It said Regulation Z is reasonable and companies that follow it are in compliance with the law.
"I'm getting completely disheartened," said Sandusky, Ohio, consumer lawyer Sylvia Goldsmith, who represented Ms. Pfennig before the high court.
In the Pfennig case, MBNA and Household defended the treatment of fees under current disclosure regulations as simpler for both consumers and banks. "This bright-line rule ensures that creditors disclose over-limit fees in an understandable and consistent manner, permitting consumers to compare such fees across time and across credit-card issuers in a meaningful way," the two banks noted in a Supreme Court brief.
For now, the only way for consumers to know what they're getting into is to plow through the disclosure materials they receive when they open bank accounts or get new credit cards. Most never do -- as Mr. Flynn, the disgruntled Bank of America customer, admits. "We just opened a simple bank account, and they gave us a 78-page booklet, small print, and they expect us to read and understand it," he complains.
Ms. Reid, the Florida cardholder, says she is far more careful now about studying her credit-card mail. "I read every single solitary word now. I hope one of these days I won't have to have a credit card at all."
欲擒故纵为那般 银行财源滚滚来
当詹尼弗?里德(Jennifer Reid)今年4月份打开信用卡公司寄来的对帐单时，她这才意识到，要充分利用她的信用卡，她需付出多么昂贵的代价。
42岁的詹尼弗是一位X光技术人员。她的一张MBNA Corp.的信用卡上12,000美元的信贷额度已经用掉了10,000美元。4月份时，她应支付的年利率突然从前一个月的19.98%涨到了24.98%，而刚开始时，利率还是个位数。
“我真是不理解“，她回忆起当时曾给MBNA的客户服务代表打电话，抱怨说她从没有一次迟缴还款。那位代表认可她的说法，但向她指出，她的另外两张信用卡上已经积累了5,000美元的欠款。
而且，她每月还款的数量只比MBNA卡上建议的最低还款额度略多一点点。MBNA的代表说，公司现在已将其视为拖欠风险较大的客户，担心她会一直都保持有未偿付的欠款。这时詹尼弗反驳道：难道这不正是你们希望的事吗？
这也是近来越来越多的财务窘困的银行用户共同的问题。
对于某些用户──比如每个月都能还清欠款的、因为享受零利率而大肆购物的、不放过任何刷卡优惠活动的用户，消费型信用卡从没像现在这么便宜。
但对其他像里德这样的用户──比如她会因负债而换个好工作，从南加州搬到佛罗里达，信用卡给他们的感受就完全是另一回事了。
信用卡用户、消费者权益活动家和一些行业专家抱怨说，银行试图从那些快要入不敷出的消费者那里挤榨出越来越多的收入。
这些银行并没有把这些人列入高信用风险用户并取消他们用卡的权利，而是听任他们花钱，然后再对他们抬高信用额度、超额消费、逾期还款和用信用卡垫付现金等行为施以越来越严厉的惩罚。对被退回的支票和透支的帐户收取的罚款费用也日渐提高。
行业咨询师邓肯?麦克唐纳(Duncan MacDonald)说，人们感觉自己被欺骗了。麦克唐纳以前曾是花旗集团(Citigroup Inc.)信用卡分部的律师。他认为，罚款收费并非新事物，但它对信用卡公司的盈利正变得越来越重要，而且这类费用的收取对象正是那些最无力负担它们的人。
行业研究机构Cardweb.com称，2003年，信用卡手续费收入（包括零售商向发卡行支付的费用）占信用卡业务总收入的比例已升至33.4%。2000年时，该比例为27.9%，1996年仅为16.1%。
该公司说，今年5月份，用户逾期还款的罚款收费平均为32.01美元，上年同期为30.29美元，而1996年同月为13.30美元。另据Robert Hammer的数据，2003年全年，信用卡公司仅罚款收费一项就搜刮了117亿美元，比一年前的107亿美元增加了9%。
CardWeb.com首席执行长罗伯特?麦金利(Robert McKinley)说，由于在前端服务价格上各家银行的竞争压力很大，因此，信用卡行业的盈利环节向后方也就是这些收费项目上推移了。他说，过去两年来，这种做法变得越来越激进了。他说，在行业会议上，与会者的讨论经常会转向“市场能承受什么”这样的话题。
银行方面则说，罚款和其他收费在新的金融服务定价模式中是必要的组成部分。以前那种收取高额年费并向所有客户一律实行高利率的做法已经一去不复返。现在银行认为，必须依靠风险定价模式，在这种模式下，财务状况最不稳定的用户要支付更高的利率和更多的费用。
摩根大通(J.P. Morgan Chase & Co.)信用卡部门高层管理人士理查德?雷尼克(Richard Srednicki)去年秋天在一次投资者电话会议上说，在“引逗利率”(teaser rate)上面他们必须表现出竞争力。他说，摩根大通试图在信用卡利率和收费方面调配好竞争方案，以便能获得所希望的回报。
MBNA的一位发言人拒绝对里德女士的遭遇发表评论，不过他指出，在确定信用卡贷款利率时，最重要的一个考虑因素是顾客如何管理他的帐户。他说，如果一位顾客的财务情况变糟了，那么，银行必须上调他的还款利率，以防范更大的风险。
这种区别定价近年来在航空、抵押贷款等行业已有采用。不过，让银行顾客恼火的是，许多人在还款利率变动和应被收取罚款前事先并不知道。
当他们抱怨这一点时，银行会说，公告里已经宣布了，而那些公告多数顾客从来都不看。麦克唐纳说，20年前，银行的公告只有一页多点，可是现在已经膨胀到30多页，而且印刷的字体很小。
美国银行业最高层监管人士之一、联邦通货检查局官员约翰?豪克(John D. Hawke)在去年秋季的会议上警告银行界人士说，零售银行领域中，没有那项业务接到的消费者投诉比信用卡行业多；他指出，哪里的投诉源源不断且反响激烈，哪里就是催生未来立法的温床。
豪克举例说，顾客在商店收银机前出示信用卡后，虽然银行知道他要支付的货款将超过信用卡余下的额度，但银行仍批准执行交易。他针对这个例子提问说，在现实生活中，如果贷款额度已经增加了，那么，债权人还继续向贷款人收取超额度罚款，这难道不是有失公平甚至是带有欺骗性的做法吗？
直到九十年代初期，多数银行还是只提供一种主要的信用卡产品。通常年利率是18%左右，年费25美元。持卡人如果迟缴还款或超限额取款，也只会被收取少量费用。优秀顾客给银行带来的利率弥补了有拖欠行为的“不良”顾客导致的损失。
后来，发卡银行为争夺市场，开始取消年费，并竞相压低还款利率。他们抛弃掉简单的定价模式，转向他们自称是根据持卡人风险度和刷卡消费特点定制的复杂的模式。由于急于在已接近饱和的市场上求得增长，他们还开始向信用有问题的消费者提供更多的卡。
到九十年代末期，各家银行开始用很低的入门利率吸引消费者，然后向其中一些人强加各种所谓的“风险相关收费”，比如拖延还款费和超额费。联邦储备委员会(Federal Reserve) 2001年所作的一项调查显示，在一般用途信用卡持卡人中，有30%的人上一年曾被收取迟缴罚款。
就像里德一样，越来越多的消费者在发现银行对帐单上的罚金时暴跳如雷。针对信用卡延迟还款所收取的费用已明显上升，对于美国银行(Bank of America Corp.)、MBNA和Providian Financial Corp.的一些客户来说，这笔费用甚至可能高达每月39美元，提供宽限期的银行越来越少了。刷卡额超出信用额度的持卡人面临“超额支出”费，该费用可能高达每月39美元。
在今年对140种信用卡所作的一项调查中，消费者团体Consumer Action称，85%的银行已将提高延迟还款客户的贷款利率作为一种定例，而且通常只要出现一次延迟还款就会采取提高还款利率的措施。如果发现某位客户与其他银行存在拖欠还款的情况，近一半的银行也会上调利率。
自从各家银行开始在邮寄的帐单中用小字体公布这些费用后，他们基本上就不用再担心监管机构和法庭会有什么麻烦。代表消费者打官司的律师们已输掉了一系列试图挑战银行上述做法的案子。美国最高法院4月份有一项不太为外界注意的裁定，称信用卡公司在计算列于客户每月对帐单中的“融资支出”项目时，不必一定列入各项罚金费用。
而且，银行监管机构也不太愿意颁布新的法规。联邦储备委员会和其他四家监管机构未对“支票退票保护”计划采取强硬的反对立场，也令消费者团体感到失望。这些计划允许客户支票帐户透支，但每次需为此支付可能超过30美元的费用。批评人士称，支票退票保护计划基本相当于一项昂贵的短期贷款，因为超支部分必须很快就补上。
当消费者们在帐户余额不足的情况下，开出一张支票或用贷记卡进行消费时，银行将对每笔交易收取可能高达32美元的费用。5年前，这笔费用通常是20美元。
在旧金山一家医院收费部门工作的爱丽莎?弗林(Alicia Flynn)去年1月28日用美国银行(Bank of America)的贷记卡进行了4项小额消费，包括一份单价2.27美元的汤。但她和丈夫开出的几张支票也于当日到帐结算。银行于当日晚些时候对帐户进行统计时，将支票支出列于贷记卡支出前，但后者早已在收银机上进行了结算。这样，帐户就被透支了40.17美元。弗林夫妇由于超额开具2张支票和4笔贷记卡交易需分别为每笔交易支付28美元的“欠额”费，但由于合计超出140美元的最高日罚金标准，最后按最高日罚金执行。
“这有点像你某次违章停车，交警却给你开出5张罚单，”弗林女士的丈夫理查德?弗林称。
弗林先生后来得知美国银行标准的做法是首先减去金额最大的支票，随后他们发出了投诉。对此，美国银行的一位客户服务代表给他邮寄了一本小册子（据她称，这本小册子是每位客户在开立帐户时都会收到的），并指示弗林先生翻到第54页。该页描述了上述政策，并警告客户称，这种方法可能会额外地导致透支费的发生。
银行的一位发言人坚持称，大多数客户都希望金额大的支票优先结算，因为这些支票一般都用于重要事项，如租金的支付等。他表示，收取28美元的罚金意在确保客户不要经常将帐户余额耗至接近零的水平，罚金的高低是为了让客户承担银行的一部分风险成本。
银行收费问题长期以来一直是立法和诉讼的焦点之一。帮助银行提高罚金收费的一项裁定是1996年作出的，当时美国最高法院裁定，如果收费方是外州的银行，各州不得对此类收费进行管制。
1968年联邦《Truth in Lending》法案的实施是为了促进“部分消费者的信贷成本意识”。该法案规定，要对信贷条款进行实质性的披露，但没有对信用卡费用作出具体规定。根据该法案，美国国会指示联邦储备委员会制定相关规定。联邦储备委员会随后出台了Z规定(Regulation Z)，要求信用卡发卡方披露信贷成本的具体金额（即“融资支出”）和百分比年率。但拖延还款等的费用不包括在这两项计算中。
沙伦?普芬尼希(Sharon R. Pfennig) 在90年代中期还是一名大学生的时候申请了一张信用卡，有2,000美元的信贷额度。1997年，她在一家大型购物商场买衣服刷卡时较该额度超出192美元。之后，Household International Inc.便开始每月收取20美元的超额支出费。普芬尼希后来停止使用该卡，每月仍继续支付45美元的最低还款额。但每个月的罚金，加上她每个月为债务利息支付的35美元-40美元，使得其帐户欠款继续攀升。最后，她的月超额支出费升到了29美元，而总费用则膨胀到700美元左右。
1999年，普芬尼希向俄亥俄州联邦法院提起诉讼，指控Household和MBNA（后者收购了Household的信用卡业务，其中包括普芬尼希的帐户）没有在每月对帐单的“融资支出”中列出超额费，对信用成本的表述有误，这虽然没有违反Z规定，但违反了《Truth in Lending》法案。
上诉法院支持了普芬尼希的观点，但最高法院今年4月21日的裁定却支持信用卡公司。最高法院称，Z规定是合理的，按Z规定行事的公司就是遵守了其他法律的规定。
“我太伤心了，”俄亥俄州消费者律师西尔维娅?戈德史密斯(Sylvia Goldsmith)表示。在最高法院的审理中他是普芬尼希的诉讼代理。
在普芬尼希的案子中，MBNA和Household称，根据现行披露法规的规定，费用的处理对消费者和银行来说都比较简单。“该规定确保信用卡公司以易于理解的、前后一致的方式进行超额支出费的披露，使得消费者可在不同的时间和不同的发卡行间比较这些费用，”这两家银行在法律文件中称。
就目前而言，消费者们获知“信用卡意味著什么”的唯一方法是，仔细阅读在开立银行帐户或获得新的信用卡时拿到的披露材料。大多数人从没有这样做过，满腹怨言的美国银行的客户弗林也承认这一点。“我们只是开立一个简单的银行帐户，他们却给我们一本78页厚的手册，全是小蚂蚁般的字体，却希望我们阅读并理解其中的内容，”他抱怨道。
佛罗里达州的持卡人里德表示，她现在在看信用卡对帐单时要仔细多了。“我会一个字一个字的仔细读过去。我真希望有一天我再也不需要用信用卡了。”
