Consumer Advocacy, Transparency And The CARD Act
Everyone is a consumer, yet few are the ranks of consumer advocates. Corporations have lobbyists, spokespersons and public relations organizations shouting their perspective through every available media, but consumers have just a few advocates with their lonely voices on the back pages of the paper and increasingly, on blogs like this one.
Prices Must Mean Something
Last week, I went to a restaurant. The menu said one price, and my bill said another. Actually, the bill listed the correct price, along with an undisclosed surcharge. You can read the entire story over at my personal blog Steele Street.
Ultimately, I found out that an entire shopping center here in Colorado was having it’s tenants add in a surcharge to all of their customer’s purchases. It seems the city of Lakewood Colorado, just outside of Denver, agreed to give the merchants of this particular shopping center a small tax break in sales tax in exchange for collecting a slightly larger percentage that they would use for the maintenance of the shopping center. My frustration derived from the fact that the surcharge was not disclosed anywhere at the restaurant or on the menu, it was just added in to the bill, apparently in the hopes that customers would not notice or care. Admittedly, I had been to the shopping center a handful o f times before and had not noticed.
This time, I did notice, and through my efforts, the city has agreed to require all merchants to post the surcharge.
Transparency
I define transparency, when applied to finance, means that all parties to a transaction are aware of the terms of the transaction at the earliest possible point. When the surcharge appeared on my restaurant tab, after I ate the meal, that was the exact opposite of transparency. Likewise when a bank adds all sorts of tricks, traps, and hidden fees, they are purposely obscuring the potential costs of the transaction. Failing to disclose the terms of a transaction, or hidding them in pages of fine print are other ways of obscuring consumer’s ability to evaluate a transaction.
The CARD Act
As I have observed, the CARD Act made great strides in reducing the tricks traps, and hidden fees that were the bed bugs every bank’s credit card agreement. Predictably, banks raised their interest rates to compensate for their reduced fees. In the interest of transparency, this has been a fantastic trade off. Interest rates are prominently disclosed, typically in large print on the credit card application as well as in multiple locations on each statement. This kind of transparency approaches the gold standard, the gas station. Think about it, when you drive by a gas station you always see a large sign indicating the price you will pay in a common format, per gallon. It is perhaps the last advertised price that still includes all taxes and fees. On the opposite end of the spectrum is a car rental, which can include a multitude of taxes, fees, options, surcharges and every conceivable gotcha in a multi-page contract. To compare one company to another, you can’t even get close to apples vs. apples as no rental car company will even tell you what kind of car they will rent you.
My point is to utilize the new protections in the CARD Act. If you pay interest on your balances, it is now easier than ever to shop for the smallest interest rate, knowing that the other conditions will be much more fair, if not equal. By the way, the higher rates combined with the lack of tricks and traps makes this the best time to pay off your balances.
If you never carry a balance, you have less to fear from surprise charges than ever. Now is the best time to really shop aggressively among the outstanding reward card offers out there. We may truly be in a golden age of consumer choice in the credit card market.
