Tuesday night, PBS’s Frontline aired “The Card Game.” The documentary let loose a flurry of information about the credit card industry, and the CreditCards.com editorial team, along with some friends, were right there to absorb and comment on it during our first ever Twitter-periment.
Over the course of the one-hour show, which you can watch online here, about 170 tweets were broadcasted with the term #cardgame in them. That term, known as a hashtag, let us track people talking about the Frontline piece.
In total, there have been 213 tweets about the topic from 30 different participants since Nov. 23. Joining in the conversation was the CreditCards.com team — @takingcharge, @jeremymsimon, @connie_p, @mattsnews and @tylermetzger — along with a wide-ranging cast that included @DianeBuxton of WGBH-FM, Boston’s public broadcast station, consumer credit author @marcyesque, finance bloggers @CardAnalysis and @WayTooHigh, and other individuals, including @tigerbeat and @rebornmex.
A barrage of comments — ranging from technical financial terms to questions about pound cake — went up as the documentary unfolded. Here’s a sampling.
Providian, the fee pioneer
“The Card Game” opened with the story of Providian Financial Corp. Providian is credited with changing credit cards from a plain-vanilla financial instrument into the hard-to-understand, fee-laden products they are today. They were the guys who enticed everyone to get a credit card with innovations such as teaser rates and no annual fees. And they were the guys who stuck it to you with universal default, late payment fees, “any time, any reason” interest rate increases and penalty rates once you were hooked.
“The pricing was designed that it would require a degree of some sort to understand how many different ways I’m paying and what I’m paying,” said Shailesh Mehta, former CEO of Providian. “I mean, borrowing on a credit card, nobody knows what the real cost is.”
Here’s what some folks tweeted about Providian:
Marcyesque: #cardgame the guy from providian must’ve studied pt barnum: sucker born every minute
Connie_P: Providian Financial’s former CEO says they were making over $1 billion a year from credit cards #cardgame. Pioneers in credit card profits.
Takingcharge: #CardGame Boy, that Frontline interview with Providian ex CEO Shailesh Mehta was a coup. (Wish we’d had it!) Really pulled back the curtain
Credit card trickery
The documentary then moved on to what it called “traps” designed to force customers into a cycle of debt. One of these tricks is known as universal default, which means that if you default on a loan, your rates could be increased on different loan as well. Other terms explored were stealth pricing and penalty pricing.
Another common practice is simple: If you don’t pay your bill on time, your interest rate could be increased or your credit limit could be slashed. “The Card Game” profiled several people hit with such problems. Most of them believed they were tricked by the fine print in their card agreements.
There practices, for the most part, were overlooked due to deregulation. “The cops left the street,” said Sen. Chris Dodd. The dominant ideology was “the market will take care of people.”
Here’s what people said about credit card traps:
Marcyesque: #cardgame universal default=stealth pricing. It’s legal to charge any fee or rate in US on credit cards.
DianeBuxton: Pam’s credit card co. says that she’s a good customer and times are tough so they are going to RAISE her APR!! #cardgame
Tylermetzger: “let the market work” … ya, how’s that working out? #cardgame
WayTooHigh: #CardGame Customer paid 5x as much in interest and fees as they did on purchases. Credit card companies disclose TINY PRINT
Connie_P: The little guy carries the biggest burden and the wealthy get over in the #cardgame. Not surprising.
Credit card reform
The Credit CARD Act was signed into law by President Obama May 22, 2009. It is the widest-ranging set of changes aimed at credit card issuers and users ever passed. A major portion of the law limits when credit card interest rates can be increased.
Getting the rules into law was no easy task. The industry had, and still has, a lot of politicians and money on its side. For example, Sen. Chris Dodd, co-credited for getting the law passed, accepted millions in campaign contributions from the banking lobby.
So concessions had to be made: Business cards weren’t included in the act, and debit cards were completely overlooked. Also, major provision of the act don’t go into effect until Feb. 22, 2010. This extra time is a window of opportunity for issuers to increase rates and cut limits before the laws come down on them.
Nessa Feddis, of the lobbying group the American Bankers Association, said Congress knew rates hikes would happen, and it was an acceptable trade-off.
Some credit card reform action on Twitter:
Tigerbeat: @mattsnews Yes to interest rate cap Raising rates so high makes it difficult or impossible for people to get out of debt #cardgame
CardAnalysis: The ABA is a joke….how about the fact 35%-45% of a BANKS card program revenue comes from FEES? Vs 10% at Credit Unions! #cardgame
CUTweetTrack: Did you notice the way Bergman cocked his head when the ABA “bizarro” women said “it’s not the fault of the credit card cos”! #CardGame
Connie_P: @Marcyesque Maloney’s bill to speed up the Credit CARD Act passed in the House but has stalled in the Senate. #cardgame
Debit cards and overdraft fees
The “Card Game” depicts debit cards as the new frontier for banks. Why? Overdraft fees.
In 2008, banks collected nearly $28 billion from overdraft fees, according to the Associated Press. Overdraft fees are charges made against your account when the purchase amount exceeds the available credit line or checking balance. Banks call this service a “noncontractual courtesy” that they extend to customers to avoid bouncing checks or having a debit card denied. But for others, it’s just another way to hose the customer.
Frontline told the story of one lady who bought a small pizza for $7, but ended up paying $40 for it. She had insufficient funds and was charged a $33 overdraft fee. That’s more than a 2,400 percent annual interest rate for a one-week loan. Yikes.
Scott Talbott, Vice President of Financial Services Roundtable, said overdraft fees came about because customers asked for it. “There wasn’t a survey per se,” he said. “It’s based on years and years of working with customers telling us what they want.”
Overdraft fees were also embraced so banks could compete with other lenders, such as pay day loan services, according to the documentary.
Here’s what a few people said about debit cards and overdraft fees:
Mattsnews: “I asked if there were any hidden fees, and they said no.” Quick tip: In the words of a former president, “Trust but verify.” #cardgame.
Jeremymsimon: $7 slice + $33 debit card overdraft fee = $40 pizza! #cardgame math
Rebornmex: Let consusmers bid on rights to kick/slap bank & cc executives -that should make up for any so-called “lost” fees! #cardgame
Takingcharge: #cardgame I’m clearly out of step with modern finance. I was raised with a different definition for the word “courtesy.”
There was no pound cake served during the documentary, nor was it covered by Frontline. It still managed to get into our Twitter feed, though.
Connie_P: I am multi-tasking to the max…got a pound cake in the oven…timer went off 3 minutes ago…watching #cardgame and tweeting about it…
And that’s that. Thanks again to everyone who joined our first Twitter-off, and big ups to Frontline, PBS and reporter Lowell Bergman for your hard work. Oh, and if you aren’t already, be sure to follow everyone at CreditCards.com on Twitter … and all of those who contributed: See ya next time!
See related: Join us in our first ever Twitter-periment, 24 hours of credit card tweets on Twitter, Credit card issuers dip a toe into social media