Living with credit

Need proof of racial profiling in credit card offers? Ask Rich Aguirre.

Connie Prater

Rich Aguirre knows firsthand how racial profiling works. The longtime credit counselor at Take Charge America, a Phoenix-based nonprofit credit counseling agency, says his Spanish surname has generated an interesting mix of unsolicited credit card offers.

The credit card offers come to his Arizona home in both English and Spanish — but the terms are dramatically different. English mail offers 9.99 percent interest rates and $5,000 credit limits while the Spanish language offers are for up to $500 with 19.99 percent or higher interest rates plus $100 in annual fees.

“It sort of annoyed me,” says Aguirre, who brought the incident up during a recent interview about sharing credit card accounts. “In English it comes to me a certain way and in Spanish I get another offer.”

Fee harvesting
What incensed him more was the fact that the Spanish language solicitations were for so-called “fee harvesting” credit cards. These are the cards typically marketed to people with bad credit. Credit card issuers offer low credit limits of about $500 and charge upfront fees (i.e., account opening fees, annual fees, security deposits or account maintenance fees) before the card is ever used. The fees eat up most of the available balance on the account and the user may be close to going over the limit with the very first purchase — risking over-the-limit fees.

Fee harvesting cards are so reviled that the Federal Reserve Board has included them in proposed new credit card rules targeting “unfair or deceptive” practices. Regulators want to ban the cards if upfront “fees or deposits utilize the majority of the available credit on the account,” according to the proposed rule. Also, fees that exceed 25 percent of the available credit limit would have to be spread over the first year of card use, rather than piled on at the beginning.

Aguirre says he sent the mailers to the Arizona state attorney general’s office to investigate possible exploitation of Hispanics in the state. Advocates from the National Consumer Law Center and the Center for Responsible Lending have complained that fee harvesting card issuers deliberately target minority communities for offers.

Fed redlining study
Racial differences in credit card lending has been documented before. A study released earlier this year by the Boston Federal Reserve found racial profiling based on where credit card applicants live. Credit card applicants living in black neighborhoods (as identified by U.S. Census tract data) were less likely to get credit cards than applicants living in white areas — even if they had the same credit history.

In Aguirre’s case, he had the same credit history because he was the same person.

See related: Who gets credit cards may be a matter of black and white, Evils of “fee harvesting” credit cards known for a long time

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  • Peter Moenickheim

    If both offers are from the same bank, this should be reported immediately to the bank’s regulator! If the offers are from different banks, it shows how different banks evaluate potential customers.

  • The profiling needn’t be racial or ethnic, and it probably isn’t. The spanish-language ones may be sent based on zipcode, while the english-language ones may be sent based on soft-pulling the consumers’ credit profile. If that’s the case, you’re looking at something shotgunned with respect to the spanish-language offer (and that kind of approach would justify lower limits) and something targeted with respect to the english-language offer (where they already know something about the consumer and are comfortable offering higher limits).
    It’s an important distinction from the legal point of view, though for the recipient the result is the same as if he had been singled out for being hispanic.

  • Joel

    You do realize that companies have databases that determine potential income based on zip code, right? Not to mention that numbers could probably show many spanish speaking neighborhoods, as well as Chinese (I lived in Chinatown in NYC), are filled with people starting a new life and don’t have the established income and credit history that spans 20+ years. It’s a mathmatical system more than anything else.
    For instance, anything sent to 90210 would assume a higher income than 10002 in the late 80’s. I know this because I know people who work for the companies who track this information. You do not think that white poor rural communities get as many offers for low apr/amex as Beverly Hills, do you?
    And do you think another country would have a better system? You have to look at it more objectively and consider the fact that maybe there IS a reason certain areas are not seen as ‘upper crust’. For every hispanic neighborhood that might get those mailings there is a 1,000 poor white areas.
    I know this because I live in a 3-D world and move about and live among many cultures at once and have all my life.

  • Raul Ramos y Sanchez

    A Spanish surname is not an indicator of someone’s race. As the U.S. Census Bureau makes very clear, Hispanics “may be people of any race.” In fact, “Hispanic” is not included in the six racial classifications used by the Census Bureau. So the charge of “racial profiling” is inaccurate. It’s possible that ethnic discrimination may be at work here. But to treat the diverse group of people labeled Hispanic as a single race is in its own way as demeaning as the unscrupulous lender noted in the article.