By on April 23, 2009

One of our Best and Brightest sent me a link ([email protected]) to an article in The Charlotte Observer about GMAC’s move away from the Bank of America (BofA) and into the credit card business. As one of the few media commentators who knows enough not to report stories about which I don’t have a fucking clue, I pinged our man William C. Montgomery for some analysis. In addition to reviewing cars for TTAC, Bill works for a large credit card company. He knows his onions. While his reply reveals that there’s nothing untoward here, and TTAC’s core concern is GMAC’s car loan biz, I thought it sufficiently interesting to share with you, our highly informed (now more so) audience. Forgive the digression.

Let me tell you the state of the credit card industry right now. We expect the default rate this year to be about 15% (up from about 6% during normal years). This means that for every dollar we lend, only eight-five cents will get paid back. Plus, it costs us about another 6% to borrow the money, print and mail statements, maintain customer service call centers, etc. In other words, we’d need to be earning 21% in finance charges just to break even. On top of this, new credit card lending rules make it much harder to raise interest rates. In other words, no bank want’s to be in the credit card business right now. Just about every bank I know of is looking to unload their credit card receivables so that they can lesson their exposure to the sky high credit losses we are experiencing in the current economy.

So, I would speculate that BOA told GMAC that they did not intend to renew their contract to issue GMAC credit cards. GMAC probably tried to shop the portfolio to other banks and couldn’t find any credible takers. With no better options GMAC decided to take the portfolio in house (with what money, I don’t know). That may be why they’ve poached some of BOA’s credit card executives.

I wouldn’t think that there is anything scandalous about any of this. BOA private labeling cards for GMAC is standard industry practice, as is the purchase of auto loans mentioned in the article. Nothing in these transactions necessarily indicates any negligence or malfeasance on the part of GMAC or BOA executives. It just reflects the current state of our economy. And perhaps one more death knell for GMAC.

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43 Comments on “GMAC Credit Card Biz Breaks with BofA...”


  • avatar
    no_slushbox

    Why would GMAC take over BofA’s bad credit card debt, why not just leave the old accounts with BofA and stop offering new GMAC branded credit cards (assuming BofA declined to renew that agreement).

  • avatar
    JPMotorsport

    @no_slushbox:

    ‘Cuz there’s still interest to be made from the 91% that still have jobs.

  • avatar
    John Horner

    Credit card default rates are high because the credit card companies have routinely pushed an amount of available credit into many consumers hands far above that which they can reasonably handle.

    For instance, what is the deal with giving credit cards out to almost any college student? Most college students are already spending more than they earn and are funding the gap with student loans. What sober minded credit analyst puts an additional revolving credit line in the hands of someone who is already upside down on their cash flow?

    I also find it hard to believe that credit card companies are spending 6% of the typical card balance on routine statements and the like. How much of that 6% funds agressive marketing efforts and high executive payouts?

    Total credit card lending outstanding probably has to drop 30%-50% in order to get down to those borrowers who are really credit worthy.

  • avatar
    brettc

    BoA just sent us a notice yesterday that our credit limit was being lowered. The funny thing is, we never asked BoA to up our limit to the $20K range, so it’s good to see that they’re clueing in that insanely high credit limits haven’t worked out all that well. As for GMAC credit cards, I don’t have one and don’t plan to ask for one unless GM suddenly stops sucking.

  • avatar
    menno

    I’m surprised the credit card companies haven’t offered my Newfoundland dog a credit card. They offered one to my son when he was something like 17 years old (they probably thought he was 18; probably found he had graduated high school or some such).

    Actually i did hear about a guy who claimed a credit card offer came for his dog, once!

    Not surprising…

  • avatar
    golden2husky

    You are also leaving out the fact that the credit cart companies also get a transaction fee from all the sales that are charges. Add in that when these companies aggressively market cards to people, the fill them full of traps for the unwary. For example, low or no interest on balance transfers. Sounds great until you read the fine print that states “lower interest balances get paid off first”. so Joe Schmuck transfers 5K in debt and begins using the card. Now, a balance builds at a full rate that can’t be paid off until the balance goes. Or how about the poor guy who takes advantage of a low rate on a Bank of America card and is accidentally late by even one day? Bam, default rate of 25.99%. Thankfully we are a zero balance family. This industry has lured people into debt like a moth to a light. I have no sympathy for the credit card industry. Anybody out there who feels even the slightest bit of remorse for them is a fool. You’d be better off feeling sorry for a GM bankruptcy.

  • avatar
    William C Montgomery

    How much of that 6% funds agressive marketing efforts and high executive payouts?

    Not much. Executive payroll is a nit compared to the expense to employ thousands of customer service and authorization reps, thousands of employees that process credit applications, thousands of collectors, and thousands of fraud investigators. Plus expenses for payment processing, printing and mailing statements and correspondence, telecom, credit bureau, computer servers and software, premises, etc.

    And don’t forget cost of funds. The fed rate has no bearing on credit card loans. The fed doesn’t have enough money to underwrite all of these loans so most credit cards are securitized, meaning bonds are issued to raise cash to lend credit card customers. The true cost of funds is the dividend rate on that paper.

  • avatar
    Pch101

    B of A assumed a large credit card operation when it acquired MBNA, which was the largest affinity card company in the country. B of A may have bitten off a bit more than they can chew, and are looking to purge some of these relationships.

    It sounds as if GMAC was a victim of circumstance in this particular case. But still, you have to wonder why they don’t just exit the credit card business entirely.

  • avatar
    no_slushbox

    “Let me tell you the state of the credit card industry right now. We expect the default rate this year to be about 15% (up from about 6% during normal years).”

    This is very misleading; a default simply means someone isn’t paying completely on time. The credit card industry aggressively collects on defaults with judgments, liens and wage garnishments, defaults are not write offs.

    And the credit card industry has so many defaults because it actively peruses people with bad credit who will not qualify for good interest rates and who will carry high monthly balances.

    The author left out the fact that the credit card industry refers to financially responsible people that pay off their credit cards every month and never carry a balance as “dead beats” because they are not profitable enough (although they are still profitable because of seller paid transaction fees).

  • avatar
    capdeblu

    My mastercard had a $12,000 credit limit and 9.9% interest rate for several years. I have never been late on any payments and my income has not changed.

    I recently received notice that my credit limit has been reduced to $2,000 and the interest rate is now 14.5%

  • avatar
    William C Montgomery

    You are also leaving out the fact that the credit cart companies also get a transaction fee from all the sales that are charges

    Visa and MasterCard make money from transaction fees because they own the systems that connect the merchants to the banks. The banks earn money from finance charges and other fees (bounced checks, late payment, over limit, annual fee, pay by phone).

  • avatar
    William C Montgomery

    This is very misleading; a default simply means someone isn’t paying completely on time. The credit card industry aggressively collects on defaults with judgments, liens and wage garnishments, defaults are not write offs.

    Not true. The default rate is the net credit loss. This means the amount of money lost to people that do not pay within 180 days (per federal rules) that gets written off offset by the dollars recovered through collections efforts.

  • avatar
    cardeveloper

    and the latest scam, not sending out the credit card bills. I have one card, that in the last four months has not sent the bill twice. It is the only card I’m having an issue with. I pay it off every month, so for $100 in purchases I get to add in $35 in missed payment costs. The card is going to be canceled. They waived the charge the first month, refused the 2nd time.

  • avatar
    William C Montgomery

    The author left out the fact that the credit card industry refers to financially responsible people that pay off their credit cards every month and never carry a balance as “dead beats” because they are not profitable enough (although they are still profitable because of seller paid transaction fees).

    No. We call them “transactors.” Credit card companies lose money on transactors because it costs $$ to maintain each account. Generally, credit card companies try get transactors to sign up for premium cards that have annual fees to offset the expense of maintaining the account in the absence of finance charge income.

  • avatar
    no_slushbox

    William C Montgomery:

    I didn’t realize that accounting practices offset late payments with prior collections for the “default rate”.

    But what remains is that the credit card industry made this bed for itself by actively perusing the young, poor, and financially irresponsible as profit centers.

    “In other words, no bank want’s to be in the credit card business right now.”

    I can only hope that this is true, and remains true, and is not just a bailout seeking bluff to the “credit crunch” panic stricken federal government.

    A lack of profitability is the only hope to get rid of the credit card industry since the Supreme Court allowed the credit card industry to escape the state usury laws and consumer protections that prohibit other socially destructive nuisances like casinos, drug dealers and brothels in most states.

    I’ve had insiders tell me that “dead beats” is a common term, but “transactors” sounds like a more acceptable term to put in writing.

    I’ve never had a credit card, and I always thought that the “transactors” were still profitable because of transaction fees, but if “transactors” are truly unprofitable I might have to consider becoming one.

  • avatar
    Pch101

    I’ve had insiders tell me that “dead beats” is a common term

    I actually read an interview several years ago with a banking executive who used that very terminology to describe the “transactors”.

    The banks can profit from those transactors who run enough charges through the account to create merchant fee income, even without an annual fee. I’m not sure what that amount is, but I would think that several thousand dollars per year in charges should generate enough merchant fees for them to break even.

  • avatar
    frenchy

    I work in client retention for a major credit card company. The term we use for people that do not carry a balance is a transactor. Deadbeat is the term we use for people that don’t pay on time. Sucker is the term we use for people who carry a huge balance.
    My job is to change people’s minds about canceling their account. Probably half of the people I talk to do not carry a balance. This leads me to believe that these accounts are profitable. That or they make the banks balance sheets look better by having less risk.
    The thing that gets me about people is that they think the credit card industry is unfair. The fact is that the shady things the banks do are spelled out in the card agreement. The agreements actually say that the bank can change your interest rate at any time, for any reason, so long as they provide 30 days written notice. That’s the agreement that people make. I just don’t understand how anyone can feel comfortable racking up $20,000 in debt on a card when the terms are written that way. It might not be fair but it is in the agreement, and it is an unsecured line of credit. If people don’t like it, they should look into other ways of financing the things they can’t afford.

  • avatar

    William C Montgomery, thank you for your insight and willingness to try and defend the practices of the credit card companies. I’m a transactor, a deadbeat, what have you, and I appreciate what credit does for me as a responsible cardholder, but I absolutely despise the practices of irresponsibly extending credit to anybody with no regard for actual creditworthiness. Credit card companies have a strong incentive to convince people to get in significant debt, which dumb people happily do at great cost to their finances and their health (i.e. stress).

    All business has a degree of predation, but it’s just so easy for credit card companies to trick people into trouble by waving “free money” under their noses.

  • avatar
    imag

    Nice digression article; nice comments. I can’t believe the default rate is going to be that high – 15% is astonishing.

  • avatar
    William C Montgomery

    The banks can profit from those transactors who run enough charges through the account to create merchant fee income, even without an annual fee. I’m not sure what that amount is, but I would think that several thousand dollars per year in charges should generate enough merchant fees for them to break even.

    Again, the 3% discount that merchants see primarily goes to Visa or MasterCard. The sales draft revenue that the banks realize barely covers the cost of telecom and transmission expense of getting a sale authorized and posted to a customer account. At current rates I can see no way that a bank could make a profit from transactors on sales draft revenue alone.

  • avatar
    William C Montgomery

    I actually read an interview several years ago with a banking executive who used that very terminology to describe the “transactors”.

    In my 13 years (9 as a manager in accounting and last 4 as a financial controller) I have never heard the term “deadbeat” used to describe transactors. That doesn’t mean that other banks don’t use the term but I tend to think that the executive you reference was using it colloquially, not as common industry term.

  • avatar
    William C Montgomery

    William C Montgomery, thank you for your insight and willingness to try and defend the practices of the credit card companies. I’m a transactor, a deadbeat, what have you, and I appreciate what credit does for me as a responsible cardholder, but I absolutely despise the practices of irresponsibly extending credit to anybody with no regard for actual creditworthiness. Credit card companies have a strong incentive to convince people to get in significant debt, which dumb people happily do at great cost to their finances and their health (i.e. stress).

    All business has a degree of predation, but it’s just so easy for credit card companies to trick people into trouble by waving “free money” under their noses.

    Please don’t think of me as an apologist for the industry, I’m just trying to get facts straight on some of these technical issues and popular myths. I can’t defend some of the marketing practices that some (if not many) of the companies employ. And I certainly agree that too much credit has been made available to too many people, which I largely blame for the banking crisis that we are all enjoying right now.

    And personally, I recommend that anyone with a credit card be a transactor.

  • avatar
    Gottleib

    I get the distinct impression that some of these comments come from persons that believe credit is a “right”. While I am not in favor of paying fees or interest, I do enjoy the privilege of not having to carry cash with me to make every purchase.

    I did assume I paid my way through the use of my card because of the merchant fees. If not then I thank the three banks that have issued me cards for which they have not earned any money from my usage.

    Yes I do agree that credit facilities were too freely given away and now we all are paying the price for that in this current recession.

    Of course my bank does make some money on my car loan which will paid off in less than a year. It is at a rate of 6.25%, but it would save me very little to refinance what is now a 4 year old car.

  • avatar
    Airhen

    I have been a transactor for five years now. It’s a great feeling to keep what I use to pay out in interest every month for myself. It took me taking a job that I hated to pay off that mess that I got myself into.

    Now my wife and I just use one card and keep it paid off each month… online too so no lost statements. And about three times a year I get $150 cash back. :)

  • avatar
    no_slushbox

    Gottleib:

    “I get the distinct impression that some of these comments come from persons that believe credit is a ‘right’.”

    The credit industry (as a political force, not at an individual employee level) argues that credit is a right (at the right price). I do not think credit is a right.

    If certain people cannot qualify for certain loans because of interest rate caps, restrictions on “universal default” provisions or other consumer protections I have no problem with that.

    That is a much better alternative than the asset bubbles, socialized bank losses and indentured servitude that come with loose credit.

    I have no problem with people that cannot qualify for good credit being denied the opportunity to get high interest credit. Just like people are denied the opportunity to get street drugs, to get prostitutes, or, in an unfortunately decreasing amount of places, to gamble*.

    *I have no problem with Vegas, I actually think it is a pretty cool place, but it only works because it is Vegas, and because Vegas had a monopoly. The expansion of gambling outside of Nevada is creating Atlantic City ghettos, not Las Vegas boom towns.

  • avatar
    Pch101

    While I am not in favor of paying fees or interest, I do enjoy the privilege of not having to carry cash with me to make every purchase.

    The point is that it is disingenuous for the credit card companies to cry foul, when their entire business model is built on keeping people in debt, making perpetual interest payments. Now they claim to be surprised that people aren’t paying them, even though they made a point of looking for customers who would stay buried in debt.

    The reason that they are tightening credit is not because borrowers are behaving in unexpected ways — it is quite predictable that default rates increase during economic downturns, and banks are supposed to know this. The real problem is that the banks are so overextended themselves that they are not properly capitalized to handle the bumps in the roads for which they hire actuaries to predict.

    They want to blame the little guy, but it is the banks who have proven to be irresponsible. They lowballed their default forecasts to justify overextending themselves, failing to account for how their customers would predictably behave when the economy hit a down cycle.

    Now that the banks are desperate for cash, they’re grabbing it whereever they can find it, punishing their most vulnerable customers because they can, while simultaneously taking those customers’ tax dollars to shore up the mistakes that the bank made on its own volition. It wasn’t just the average Joe who maxxed out his limit.

    This reminds me of the GM defender argument re: SUV’s — “Oh, how could we have known that SUV demand would fall and oil prices would climb?!?!” — when a well-run business is supposed to have enough diversification to deal with changes in the market. The banks dug their own holes, but now, they’re using your shovels to fill them.

  • avatar
    Hippo

    Redlining laws are basically a welfare program as these people are judgment proof and should never have credit cards to begin with.

    That’s why losses are as high as 15%

    Credit card default losses are much smaller with people over the median income level that can not fully discharge in BK.

    GMAC (GM) is likely over represented in the former and not the latter category.

  • avatar

    William C Montgomery, thanks again for your contributions and for staying engaged in the conversation! I know this has drifted from the GMAC story, but it’s just great to hear someone who knows what they’re talking about. I guess RF gets an attaboy too for not “report[ing] stories about which [he doesn’t] have a f-ng clue” and tapping your brainsmarts. What a nice day on TTAC…

  • avatar
    no_slushbox

    William C Montgomery:

    Please let me know if your company was ever forced to give someone a credit card because of “redlining laws”, or if your company was ever forced to give a credit card to someone with an income level below the new Chapter 7 means test levels.

  • avatar
    amadorgmowner

    Many people use their credit cards to pay for health care costs, especially if they don’t have insurance. In addition, several years ago President Bush signed a much tougher (for average people) bankruptcy bill which makes it nearly impossible to discharge any debts – you must pay them back. Bankruptcy of course for big banks means they will get bailed by the taxpayer while at the same time we get nailed by higher interest rates, fees and reduced credit limits. First, we should have nationalized health care (Medicare for all?)second, bankruptcy laws should be relaxed. The banks who were irresponsible for giving any walking person credit cannot have their cake and it, too (i.e. Tighter bankruptcy laws for us little people while at the same time have an unfettered right to offer predatory lending practices combined with no regulation of interest rates, fees, etc.) After all, they are the wizards of Wall Street who didn’t see this downturn coming, but want us taxpayers to pay twice to bail them out. That’s bullshit.

  • avatar
    skor

    If transaction fees are 3%, with a one month grace period (25 days really), that’s an annualized rate of 36%. You say that the entire transaction fee goes to Visa/Mastercard? Who puts up the money for the initial 30 days?

  • avatar
    William C Montgomery

    Please let me know if your company was ever forced to give someone a credit card because of “redlining laws”, or if your company was ever forced to give a credit card to someone with an income level below the new Chapter 7 means test levels.

    This is a loaded question. If you asked me the same question about mortgage loans, I would answer resoundingly in the affirmative. The picture is murkier when it comes to credit card loans.

    Since the 1930’s, perhaps the most widely used economic measure is consumer spending. It is regarded as a bad thing when too many citizens save their money. So every economic policy (Republican or Democratic) enacted since that time has been geared toward encouraging spending. A big part of that movement, at least since the 1970’s, has been to enact policies that open sources of credit to consumers.

    Have policies like the Equal Credit Opportunity Act and Civil Rights Act created additional pressure on the banks to make credit cards available to segments regarded euphemistically as “subprime” or “emerging markets?” Yes. But I don’t think you can hang the difficulties credit card banks are currently experiencing entire on anti-redlining laws. Furthermore, in the credit card industry (unlike mortgage loan industry) there has been a fair amount of resistance over the last decade against predatory credit card lending, so I think the credit card companies have had every opportunity to hide behind this and avoid taking on high risk customers.

  • avatar
    William C Montgomery

    If transaction fees are 3%, with a one month grace period (25 days really), that’s an annualized rate of 36%. You say that the entire transaction fee goes to Visa/Mastercard? Who puts up the money for the initial 30 days?

    The credit card bank. Therefore, transactors get 30-day intereste free loans every time they use their cards. Another reason why banks can’t make money on them.

  • avatar
    skor

    The credit card bank. Therefore, transactors get 30-day interest free loans every time they use their cards. Another reason why banks can’t make money on them.

    You mean they get an interest free loan provided that they pay before the grace period is up? If the balance in not paid in full before the grace period is up, interest is charged from the day of the initial transaction. Correct?

    I’m still not entirely clear on where the transaction fees go. Let’s say that I start with a zero balance on my card. I make a purchase of $100 dollars. The retailer is required to pay Visa/Mastercard a transaction fee of $3(3% of $100). If I pay my credit card balance of $100 on the 29th day, I do not pay any interest. However, according to you, the credit card bank put up the $100 for that 1st month. So for the first month, the bank was required to pony-up the $100 dollars but got nothing in interest from the customer(that part I understand) and no cut of the transaction fee? If that’s the case, no wonder the credit card banks dislike people who pay in full at the end of every month. It’s also clear that the real money is on the transaction companie’s(Visa/Mastercard’s) end.

  • avatar
    dwford

    I used to be the master credit card flipper. Balance transferring to 0% promo rates every year or so. I got a little crazy 3 years ago when I quit my high paying job and decided to flip a house – entirely on credit cards. Through strategic flipping of the balances I was never late and never paid more than 5.9% on the balances. I sold the house and paid almost everything off. I have noticed over the last year that none of the new offers I get have a maximum transfer fee, it is just 3-4% of the balance transferred, which really adds up when you transfer big amounts. good thing my last credit car will be paid off this year..

  • avatar

    In other words, we’d need to be earning 21% in finance charges just to break even.

    Boo freaking hoo. I’m sure the CEO of your company is living in poverty.

    There’s not a credit card company that doesn’t knowingly and deliberately break consumer protection laws. An acquaintance of mine is a lawyer who makes a nice living suing creditors for violating NY’s consumer protection laws. The companies know they are violating laws about harassing debtors but they also know that most consumers are unaware of the laws.

    As far as I’m concerned, if a creditor calls me on the phone they’re guilty of trespass to chattel. They have no right to deprive me of the use of my property and when they tie up my phone with dunning calls, that’s exactly what they are doing. I don’t pay for phone service so people can harass me. They’re welcome to mail me a bill.

    If I feel generous, I’ll offer them 25 cents on the dollar. If I’m in a bad mood, I tell them that I’ll be happy to talk to them for the fee of $500 per phone call and that any future calls from their company will constitute acceptance of my offer. I figure WaMu owes me about $20K.

    You haven’t been entertained until you’ve listened to a collection agent try to guilt a narcissistic sociopath. They try to make me feel guilty or imply that I have “problems”. I just laugh at them. They really get annoyed when they can’t run a guilt trip on me.

    On the scale of sleaze, working as a collection agent is far far worse than owing money.

  • avatar
    thoots

    Here, let me give the bank CEO’s a free solution to this “problem:”

    “We expect the default rate this year to be about 15%”

    Come on, someone has got to comprehend how these “We’re doubling your interest rate for no good reason” changes are driving good, perfectly credit-worthy, previously loyal customers towards default.

    Oh, sure, everyone knows that the credit card terms they’re signing for allow the issuers every right to screw them any way the issuer pleases for any reason the issuer can dream up, but I’m not aware of any relief regarding this state of affairs — if you want a credit card, you have to agree with terms like these.

    All I’m saying is that plenty of this “default problem” is almost entirely, directly caused by these “no good reason” rate increases. If the managers at these companies are too stupid to comprehend that making it far more difficult for their customers to make their payments — turning people who have never missed or been late on any payment in their whole lives into “default problems” — then that would be entirely consistent with my impression of the folks running American corporations these days.

  • avatar
    Lokki

    What is the deal with giving credit cards out to almost any college student?

    I’ll ask Mr. Montgomery to correct me, but here’s what I’ve heard….. and tend to believe.

    Credit Card Companies LOVE college students because

    a. they’re irresponsible kids, who don’t understand credit yet, and tend to run their balances to the (remarkably generous) maximum.

    b. Parents who have the money to send their kids to college are generally sophisticated enough not to want their kids to get out of college with ruined credit…. so they tend to pay up. The legend also suggests that typically, mom (and sometimes dad) finds out about the situation only after several juicy months of rolling interest have jacked up the stakes.

    I’m sure that this is just all urban legend, but I have to admit that I fell for this cynical explanation.

  • avatar
    TRL

    I sometimes take offense at what I think can be unfounded anti-GM/Chrysler/Ford comments on this site. In the case of CC companies however I am in favor of anything that harms these completely worthless predetory institutions. While it makes no sense to pay for an Amex card I still do and use it most of the time just so I make sure I pay it off every month and deny the other guys a chance to make money.

    I was a CC accepting small business for around 20 years and can tell you they are even more heavy handed with merchants than with consumers. For the 2 -3% they get on that side of a transaction they do treat them like crap with extra charges for every thing imagineable. Some even charge for sending them statements. When you get that stolen card charge on your account removed it is almost always charged back against the merchant, not a loss to the CC issurer.

    There is no way I would ever feel any pity for a CC issuer. I wouldn’t want my daughter to marry one either.

  • avatar
    50merc

    A very good article, and the questions and answers are just as educational. Another great reason to read TTAC.

    Credit cards are like automobiles, in that they provide great convenience but if used irresponsibly can cause great damage. There’s a difference between being a fool and being a victim.

    Ronnie, you won’t get annoying phone calls from creditors if you pay your bills on time. “If I feel generous, I’ll offer them 25 cents on the dollar.” Well, if I were a creditor and looking at a 75% (or more) default rate, I’d be annoying too.

  • avatar

    Ronnie, you won’t get annoying phone calls from creditors if you pay your bills on time. “If I feel generous, I’ll offer them 25 cents on the dollar.” Well, if I were a creditor and looking at a 75% (or more) default rate, I’d be annoying too.

    I’m just doing what the banks do with their own creditors, looking for a break.

    When a creditor turns something over to a collection agency that means they’re willing to settle for 50 cents on the dollar (or less, depending how much the agency is paying for the paper). They’re willing to take 50% from a collection agency, but if the same debtor offered them the same deal, they’d reject it.

    My friends who are physicians complain that they can no longer freebie friends and clergy. If the insurance companies find out that they’ve given someone a discount or free service, the companies will claim that that is the standard fee and will insist on the same discount. Likewise, if a creditor sends a bill to collection that means they’ve effectively set the value of that debt at 50% of face value. If the debt is worth only 50% of face value to a collection agency, well, then that’s its real value. Why should I pay them more than the real value? Just because I borrowed more than that? Cars depreciate and so can debts.

    You can be as annoying as you want, just don’t use my property to annoy me.

    Is this a double standard? After all, I’m using the credit card issuer’s property, i.e. the money I borrowed from them. No, it’s not a double standard. They voluntarily loaned me the money, knowing it was a risk. I, on the other hand, never gave them permission to use my property. If they want to discuss things with me, I’m happy to do so for $500 per phone call.

    If they don’t like it they shouldn’t offer folks like me credit cards.

  • avatar
    Balr14

    I’ve found this topic very interesting and informative. But, I’m having a difficult time understanding what point is served by lowering the credit limit and increasing the rate for good clients. I was recently notified my limit was being severely lowered and my rate was being raised on two credit cards. If I ever carry any balance, it’s only for a month or two. So, I cancelled both cards. The credit card representatives said I shouldn’t do that because it would affect my credit rating, but I didn’t really care.

    I’m aware that lots of people, in similar positions as me, are doing exactly the same thing. It doesn’t seem to make good business sense to lose a desirable part of you client base. Am I missing something?

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  • Corey Lewis: BDB 1994, design classics: Fox 5.0 Prelude Si 300 ZX

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  • Matthew Guy
  • Timothy Cain
  • Adam Tonge
  • Bozi Tatarevic
  • Chris Tonn
  • Corey Lewis
  • Mark Baruth
  • Ronnie Schreiber