Frontline/New York Times Investigation: Secret History of ...



Frontline/New York Times Investigation: Secret History of the Credit CardVideo 1, Over 1,000 Miles from Wall Street Directions:Please view the video and complete the questions on this 2-page, 2-sided worksheet. completing the worksheets access the following link for how the Credit Card Act of 2009 has changed the rules: , 1. New York law prohibited banks from charging more than __12_% on most consumer loans, while the interest rate for borrowing money was __20__%. 2. In 1981 where did Citibank move its credit card operations to? Sioux Falls, South Dakota3. Why did CitiBank move its credit card operations? To take advantage of higher usury laws4. What do you call the type of law placing limits or caps on the interest rates charged by banks for credit card usage? Usury 5. Identify the U.S. Supreme Court decision which states that regardless of where the bank is chartered; credit card interest rates are applied based on the laws of the state the credit decision is made in. Marquette Decision6. This decision meant banks could __export_ its interest rate to other states.7. Which state copied South Dakota legislation to become the “Credit card capital of the East”? Wilmington, Delaware8. For the first time in American history there were no legal _restrictions__ placed on charges banks could make on credit card holders nationwide.9. Does deregulation allow fewer or more people to get credit cards? more 10. Bankers justify the higher rates they charge due to their clients being riskier due to unsecured loans.Frontline/New York Times Investigation: Secret History of the Credit CardVideo #2 The Industry’s Best Customer1. List three reasons to use credit cards as given by consumers in the video. entertain clients, rewards (traveler miles), convenience, emergencies, spend money you don’t have2. What is a “deadbeat” in the world of credit cards? Someone who pays their credit card bill in full each month3. What is a “revolver”? Someone who does not pay off their bill, in full, each month4. Who makes up the “sweet spot” in the credit card industry? Why? Revolvers, generate more in profit5. What was the average American’s credit card debt at the time of this video (2004)? $8,0006. Why is it not a good idea to use credit cards to “make ends meet”? something could go wrong7. Approximately 7 million Americans filed for bankruptcy during a 5-year period (1999-2004). Two main triggers of bankruptcy include job loss, medical reasons, family break-up8. Encouraging consumers to take on more credit card debt is critical to the profitability of the credit card industry.9. Andrew Kahr, a peculiar genius in the credit card industry, agreed to an on-screen interview with two conditions. The conditions were not to reveal his location, and not to disclose who he works for.10. What are the two very profitable innovations in the credit card industry attributed to Mr. Kahr? reducing minimum monthly payment from 5% to 2% and 0% APRFrontline/New York Times Investigation: Secret History of the Credit CardVideo 3, Traps in the Fine Print1. Name the three credit reporting agencies. Experian, Equifax, Transunion2. Data collected by credit reporting agencies is “crunched” by Fair Isaac Corporation.3. After the data is “crunched” it is translated into a score called a FICO score. 4. A customer is considered “risky” if their score is less than 600.5. 75% of those 18 years or older have an established score.6. Your score determines how much interest you will pay on a credit card.7. The card issuer may change the terms “at will” with just a 15 day notice.8. Explain Universal Default. List two possible reasons Universal Default can be triggered on a consumer’s credit account. Your interest rate can change if you are late or violate rules in disclosure. Can be triggered by your credit worthiness changing due to late payments, or two many new credit applicastions, etc.9. How do bankers justify changing the interest rate on items already purchased? Interest rates are based on your FICO score at the time you are issued a credit card. If, in the future, your score deteriorates and your FICO score changes, your interest rate will be changed to reflect your current credit worthiness.10. What can a consumer do if their credit card interest rate is increased by the issuer? Nothing, except pay it off.Frontline/New York Times Investigation: Secret History of the Credit CardVideo #4, More Complaints than any other Industry/ Video 5, Efforts to Get Reform1. What was significant about the case Smiley vs. Citi Bank? Lifted restrictions on fees that credit card/banks can charge.2. Credit card fees were designed to encourage the consumer to use credit cards responsibly or there would be consequences. Fees have now become a profit stream.3. Who regulates the National Banks? OCC, Office of the Comptroller of the Currency.4. What Government Department are they a part of? Treasury5. What are the three goals of the OCC? Make sure banks don’t fail, ensure integrity of operations, and make sure banks deal fairly with consumers6. Providian Financial specialized in the riskiest customers with the lowest credit scores.7. Providian was found guilty of accepting payments, depositing the checks for payment, but not crediting the account for several days. What was their purpose for doing this? Greater Profits! (50% of profits were fees, double digit growth, $300 million fine…but they collected over 1 billion in fees).8. What did the Attorney General of New York accuse the OCC of doing? Trying to squeeze out the state’s presence in bank consumer protection issues…banks say they don’t have to deal with state consumer protection laws9. What happened with the OCC in January of 2004? It declared itself exclusive regulator of national banks, effectively immunizing big credit card issuers from state consumer protection laws.10. According to the Better Business Bureau the bank/credit card industry received more complaints than any other industry.11. Elizabeth Warren believes there would be fewer consumer complaints if the Credit Card industry would clearly disclose how they conduct business, particularly when it comes to minimum monthly payment.12. What explanation does the Lobbyist give for not disclosing this information? It would be wrong 99% of the time, people would continue to use the card, and they don’t pay the same minimum payment each month13. List three areas lobbyists have been successful in defeating in the credit card industry (regarding industry reform and consumer protection). Why? Minimum monthly payments, cap on interest rates, and marketing to college students. They have been successful because they have influence with legislators due to campaign contributions.14. What do you think? Are customers close to the “tipping point,” as described by Elizabeth Warren? YES! ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download