More Outrageous Credit Card Company Practices
My hometown paper, the Denver Post, has an article detailing the new credit card practice that I call consumer profiling. You may remember a while back I posted an article about Kevin Johnson, the American Express Customer in Atlanta who was had his credit limit cut by American Express. He was told, in witting, that his credit was being cut because “Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express.”
The Denver Post article expands what we know about this practice. The author of the article, David Migoya, interviews several people in the credit card industry that offer new factors beyond your credit score that may be affecting how your credit card company treats you. For example, the neighborhood you live in is cited as a factor. The rationale appears to be that if you own a home in a neighborhood that is experiencing a higher than average foreclosure rate, than you are somehow a greater credit risk, regardless of your personal financial situation.
For the life of me, I can’t see how this differs from the illegal and racist practice known as redlining. I suspect many credit card issuers are setting themselves up for class action lawsuits and/or government civil rights investigations.
Another potential factor for limiting your credit includes a change in shopping patterns. Have you discovered a new discount store lately? Oh my god, you have changed your shopping pattern and this is an indication that you are now a greater credit risk!
Finally, the article mentions that your type of employment is a factor that is now being considered. If you work in construction, that is considered to be a risky place to be right now. No credit for you! Of course the ultimate irony is that a huge number of job losses these days have been in banking and finance, the very same people who are judging you. I would not be shocked to find out that employment in that sector is somehow excluded as risky profession.
What Did Kevin Johnson Do?
It is nice to hear a followup from Kevin Johnson, the Atlanta entrepreneur who, via the Atlanta Journal and Constitution, broke this story originally. Mr. Johnson, ever the entrepreneur, has created a new web site, New Credit Rules to publicize these outrageous practices. In his latest post, he is naming names. Specifically, he has posted a list of stores that he has shopped at, called Beware, These Stores Could Harm Your Credit!
Lest you think that he is shopping at some bizarre places that only someone about to declare bankruptcy would be (wherever that may be), take a look at part of his list:
Amazon.com, Applebee’s, BP, Cheesecake Factory, Chick-Fil-A, Dave & Busters, ESPN Zone, Exxon Mobile, McDonald’s, Quizno’s, Red Robin, Ruby Tuesday, Satellite Radio XM Sirius, Spirit Airlines, Starbucks, United States Post Office, Walmart
Wow, what a bunch of shady establishments! Frankly, I think I too have shopped at each of these places at some point the last few years.
What Should You Do?
Aside from being outraged, I wouldn’t worry too hard. Thankfully, the credit card industry is very competitive. If a bank doesn’t want to give credit to people like Keven Johnson and myself who have perfect payment histories, there are plenty of other banks out there for us to deal with. I certainly am not going to change my spending habits in the slightest on the theory that it will help me with my credit score.
I would be more worried that it might potentially hurt my mortgage rates the next time I refinance. On the other hand, perhaps when it comes to your home loan, maybe it is legitimate to consider what the prices in your neighborhood are doing.
Until then, I plan to keep up with Kevin’s plight. Today, President Obama signed the Ledbetter act, named after a woman who experienced discrimination, and later led the charge to pass a law against it. It is average consumers like Mrs. Ledbetter and Mr. Johnson who sometimes make the difference.
Go Kevin!
