PLAUSIBLE DENIABILITY

As usual, the credit card companies want it both ways.

Like their supporters in Congress, credit card companies like to point out that consumers are not forced to sign up for credit cards—they sign contracts of their own free will. It is only fair, goes this argument, to hold consumers to the deals they make by forcing them to repay their debts.

This “free contract” argument is seductive and dishonest. Why? Because while credit card companies insist that consumers “meet their obligations,” they steadfastly refuse to tell us just what those obligations are.

Exhibit A: disclosure of information. For years, consumer groups and bankruptcy experts have asked credit card companies to help consumers understand what they’re getting into. For example, advocates have suggested adding a line on statements which reads “If you make the minimum monthly payment on your balance, you will take X years and X months to pay off this bill and you will pay X dollars in interest.”

Creditors have this information—and it would cost them virtually nothing to reveal it—but they don’t want to tell. In fact, when California passed a law requiring such disclosure, creditors took the state to court and got the law overturned.

Supporters of bankruptcy “reform” (like Bill Nelson, D-FL, and Blanche Lincoln, D-AR) have been telling constituents that the new bill does include consumer-friendly disclosure requirements. They’re wrong. There are some new provisions, but none of them add up to real consumer protection. For example:

(1) Some statements will have to include examples showing how long it would take to pay off a balance making minimum payments. But the examples will be based on balances of $300 and $1000. Unfortunately, these examples are more likely to be misleading than helpful, because the average family with any credit card debt has about $8000 in debt.

(2) Creditors may have to provide a new telephone number debtors can call to find out how long it will take to pay off their balance. But callers will probably have to provide complex information (like amortization rates) that does not appear on their card statements in order to get meaningful estimates.

In other words, the new provisions allow credit card companies to write plenty of self-congratulatory press releases. But the provisions will not protect you and me.

I wonder, why don’t creditors want us to know what we’re buying? Are they that ashamed of their products?