2007-12-27, Secret History of the Credit Card (4)（在线收听）

In 1996 another important Supreme Court decision open the door to bigger profits for the credit card industry and raft a new complaints from their customers. That decision Smiley.V Citibank. much like the Marquette decision before it. lifted the state restrictions this time on the fees that credit banks could charge.

“We were working this thing here for a good course free market pricing”.Duncan MacDonald who was one of the lawyers who worked on this Smiley case..

"The late fees they were come across the industry up untill smiley were in the 5 dollar and 10 dollar range ,and the economic thinking was that they had to be flexibility to allow up to 15 dollars.but when Smiley came along, and took the little of it, they went from 5 to 10 to 15 to 29 and recently it’s gone up to 39 ,and I would guess that it's probably gonna be 50 dollars a year and a half from now. I certainly did imagine that some day we might end up creating a Frank Style.”

"Frank style? What do you mean frank style?”

I looked and then I said to myself is 50 dollars a fair fee ? plus a 25 percent / interest rate and all these other fees fee that / along .For folks who probably not that risky, is that fair? I looked and I said to myself there is a frank style we create something that has to be ,has to bedealed with.

Since Smiley Credit Card companys have doubled the amount of revenue they generate from fees, late Fees ,over the limit fees, return check fees and alike.

Fee income has gone up much much faster than interest income in the business. So the fees are meant as the penalty to make sure that you pay on time or they are profit stream,

Oh they really have become a profit stream.it’s not just the fees they charged, even though they are 3 or 4 times higher than they were, less than 10 years ago .That’s the tupity iceberg when it comes to the penalty that inflict on consumers with this situation when they make their payment .it’s the penalty interest rate that really does the damage, your interest rate could double overnight.

Just so I understand the interest rate are not regulated, they can change the interest rate relationship that you have with them 15 days / . So that's a major source of profits for them. And the fees are now no longer regulated.

That’s exactly right. it’s a..en wide open. We’ll beginning to see banks do all this twigging or they are changing the interest rate or raising fees adding new fees all kinds of way they calculate the interest setting the due days on a Sunday on a holiday on the hopes that maybe you'll trip up and get pay in the late. It’s become a very entire consumer market place .

Even the industry’s top levelers disconcert,”
I think it would be short-sighted for a credit card company to have fees that would make somebody angry because they are likely to lose their customer and I think it’s gonna cost their more to replace that customer, then they are likely to get other fee ”

" You have bankers who skyrocket rates from 14 % to 25% and 40 dollar late fees and backcheck fees and so on to fall on the shoulders of the less where of. Yes, it's something bad has happened.

So we need regulations,

Oh ,we have regulation , we have regulation already. They control the currency, regulates all the national banks, and have very best powers.

The office of the Comptroller of the Currency ,the OCC is an obscure Washington agency ---part of the Treasury Department and it regulates the national banks, banks like Tracy, Citibank and the NBAA, that issue most of the credit cards in this country. Julie Willam is the acting comptroller of the currency.

” We have 3 goals to make sure that the banks don’t fail to ensure the integrity of how the banks operate their cooperate governments and to make sure that they deal fairly and honestly with their customers , At the extreme we have the ability to take forcible actions and we have done that. We have taken forcible actions ”.
Can you give us an example of how you have rode a large institution in the task.
Well, I think , probably the most / example of that would be the action that we took in connection with pridian.