The implementation of the CARD act is not yet eight months old, and people are starting to realize it’s weakness.    Simply put, the CARD Act is a static set of regulations on the credit card industry, which is anything but static.    It has always been known that these common sense regulations would be under attack by an industry desperate to circumvent them.

The Best And The Brightest

Donna Flagg offers her perspective on how the credit card industry is working to evade the letter of the CARD Act.   In her article at the Huffington Post, she recalls how she once conducted a team building exercise with some new hires for a financial company.   No matter what the rules, these eager and bright future executives would quickly circumvent them.   When called out, they would merely point out that they were not specifically forbidden them from breaking the rules in that particular way.

Ingenuity and creativity are some of the most remarkable human characteristics.  When these traits are harnessed by business and channeled towards  meeting the needs of consumers, companies can do great things.    From personal computers to mountain bikes, we all enjoy products and services created for our benefit and enjoyment.    When high achieving individuals are tasked with evading the spirit of regulations in order to maximize profit, you get innovations like payments due on holidays and  double cycle billing.    In the post CARD world, we are now seeing “professional” cards marketed towards individuals and “rebate” cards that use linguistic games to evade the law.   None of this is surprising, and in the context of Flagg’s observations, it should have been expected.    In fact, it was.

Enter The Consumer Financial Protection Bureau

The CFPB is a recently created agency that brings all of the regulators of consumer financial products under one roof.   The clear analogy is the Consumer Products Safety Commission, that is widely known for it’s recalls of dangerous tangible goods.  In the past, regulation of credit cards was handled, or mishandled by a patchwork of government entities, none of which with the clear mandate for protecting cardholders.    The idea is that credit card regulation will now be able to occur without an act of Congress.   If this new agency fulfills it’s promise, an equilibrium will be reached between the banks who are trying to circumvent the law, and the regulators who are tasked with protecting consumers.   Given the huge success of the CARD Act, I am willing to wait and see how the CFPB shakes out before making any judgements.

A couple of years ago, I applied for some Amex cards, largely in order to cash in on a big Delta promotion.    Amex approved the new cards, and I activated them.    A week later, they suspended all my accounts and I received a strange phone call from someone overseas asking for my tax information.   This is what is known as a “Financial Review”.    I described the entire process in this post, My Experience With Amex’s Financial Review.

The Consumerist Doesn’t Get It

The Consumerist, which is normally pretty savvy about such things, is utterly confused when a reader enquirers about this process. According to the post tittled: “Why Does American Express Need A Copy Of My Wife’s Tax Return?”:

Evan writes that he recently got married, and the newlyweds make more money than they did at this time last year. American Express suspects something, and has suspended their credit card, demanding a copy of his wife’s tax return from last year. What’s going on?

Based on the reader’s description, which is identical to my financial review experience, they have no clue.   All they can do is ask:

Some key information is missing here: is he carrying a balance on the card, or paying it off every month? Is he using the card more, spending more money along with his increased income?

None Of These Things Matter

The problem is not his balance, or his payment history.   It probably isn’t even his increased spending.   Simply put, the problem is Amex.   While my experience was that the financial review was triggered by opening up new accounts, I learned that these reviews are often triggered at random.     Even if it is not random, there is no point in speculating what caused this.    Assuming the reader is not some kind of fraudster or international arms dealer or something, this is just a major annoyance akin to being selected by the TSA for secondary screening.

As I wrote, the problem is really with how sloppy Amex is at executing this review.   I don’t know about you, but when I receive a barely audible phone call from a foreign speaker asking for me to fax him a release to see my tax returns, my first instinct is to hang up.   When my credit cards stopped working, I realized this was for real.   Just to be safe, I called Amex myself to insure this was not some kind of clever fraud.   It is not hard to imagine how a scammer could call up and report your card stolen to invalidate your card, and then call up and pretend to be from Amex the next day.   Of course, we don’t need scammers to interfere with your accounts when we have Amex doing it at random themselves!

Offensive On Many Levels

Some people are offended by the idea that Amex wants to see your tax returns.    Others are offended that they are abruptly canceling your card for a few weeks.    I can only imagine the difficulties people have if they were to actually rely on Amex as their sole credit card when traveling.   Personally, I stopped using Amex when traveling outside of the United States after discovering that they were charging a foreign transaction fee of 2.7%.   Think of it as a negative rewards card,  but that is another story.

Ultimately, I chose to comply with their process, but I know that many have quit Amex in disgust over this.   The crazy thing is that I hvae never heard of any other bank subjecting it’s customers to this process.   In an industry where hundreds of dollars are paid for each new customer acquired, it is amazing that this customer loosing practice still exists.    Kudos to The Consumerist for shinning a light on this, but they really should do a little homework first.

Last week, I let you know that I was going to give American Express Return Protection a try.    I had never attempted to use this add on benefit, because frankly, I was a little skeptical of it’s value.

I was able to quickly fill out the online claim form, but I did have to go through the trouble of faxing in the receipt (I would prefer everything to be electronic).    After that, I just waited.

Yesterday, all of my skepticism evaporated when I received a check in the mail from American Express.   Interestingly, I was never asked to return the actual item I purchased, a child seat for a bicycle.

According to the guidelines for the return protection program:

“Once your request has been approved, you will be instructed to send the purchased item to us within 30 days”

Now, I am left to speculate on what comes next.

1. Within 30 days, I will receive a request in the mail to ship the purchase somewhere.

2. I will not be asked to return the purchase because this particular item is too big and/or has little liquidation value.

3. This is just free money from Amex, and people who take advantage of this program are never asked to return anything.

Frankly, number one seems very unlikely.   Why would they bother to send the check first, and then later ask for the item to be shipped?

Number two seems slightly more likely, but not by much.   Very few used retail items have much resale value.    I suppose it is possible that that Amex has a list of goods that they will actually ask for in return, and this just wasn’t one of them.

Number three is tantalizingly plausible.   It just doesn’t seem like there is any attempt to have you return the item, they just send you a check.    I will wait 30 days, just to be sure.

There is a maximum purchase price of $300 per item, and a maximum return amount of $1,000 per year.   For the sake of my readers, I will endeavor to test this little known feature throughout the remainder of this year.