You Are Pre-Approved--8 Billion Times
In 2005, Congress gave the credit industry what it wanted: tighter bankruptcy laws. In 2006, the credit industry responded: It mailed out 8 billion credit card solicitations--up 30% from 2005. It looks like if Congress will make it tougher to go bankrupt, then lenders will try harder to get people to borrow.
With about 110 million households in the US, that's about 73 card offers per household. If the average card offers is about $5,000 in pre-approved credit, that's about $365,000 in offers for every American household--or about $1000 a day, every day of the year.
By comparison, median household income is about $46,000, or about $127 a day. It wouldn't be unreasonable to speculate that many families are offered about seven times their annual incomes in credit card debt. Of course, the mailings are the only offers that are counted. There are solitications in the malls, on college campuses, and stuck in magazines. They are on television, radio and the internet. I find credit card solitications in the bottom of the plastic bag every time I buy something at a nearby college bookstore.
8 billion credit card offers. Think of the postage. The paper. The possibilities. And think how profitable credit card lending must be to make it worthwhile to mail out 8 billion solicitations when the response rate is less than 0.3%.
Credit card companies are riding high--more lending and less worry that families in trouble will file for bankruptcy. Thanks to their friends in Washington, life is good.
Judging by my mail there seems to be hundreds of different cards, but in fact most of those offers are from three banks (if I got my mergers straight). www.minneapolisfed.org/pubs/region/06-06/interchange.cfm
That's BofA, Chase, and Citi.
February 26, 2007 9:10 PM | Reply | Permalink
Again, insightful service. Thanks.
It is not even business anymore. It is a form of social control and value extraction from people as though they were all on the Matrix.
Remember: The run on the bank scene in "It's a Wonderful Life."
February 26, 2007 9:57 PM | Reply | Permalink
I fought Citibank in court and now I still get solicitations in the mail. American Express told me when I settled they'd never give another account. I was blackballed for life. I get solicitations from them as well. They pay no attention to their mailing lists. The real problem is the applications that are getting approved.
Jim Anderson
The Truth About Credit
Facebook Profile
February 27, 2007 8:31 AM | Reply | Permalink
Ms. Warren
This is the number one front of feudalism 2.0. It's one step away from slavery - wasn't "indentured servitude" no more than Xtreme borrowing?
Thanks for your attention to this subject. I can't seem to convince people that the threat to their hearth and home is much greater from financial overlords than Al Quaeda, but it's an incontrovertible fact nonetheless, and I hope you can get through to some people.
February 27, 2007 9:29 AM | Reply | Permalink
50 Year Mortgages.......
Interest Only Loans.......
10 Year Car Financing.......
Payday Lending.......
And it goes on and on and on. Very rapidly, the middle and lower middle class is finding itself squeezed to the point that they will be unable to meet the basic obligations they have. Never mind the poor who, if the have jobs, have to resort to getting loans ahead of paychecks in order get by.
The financial dance for much of America is almost over and when it comes time to pay the band, I'm afraid our pockets will turn out to be empty.
But hey, the stock market is at an all time high, right??
Feel better?
Didn't think so.
February 27, 2007 11:03 AM | Reply | Permalink
I suspect last year's banruptcy act also changed the rules regarding credit solicitations. I used to receive enough credit card mail to heat my house, until a daughter pointed out to me that each solicitation contained information regarding an email address or telephone number I could call to have my name permanently removed from the company's mailing list. The letters stopped coming. But since the new act, I am being flooded again, and the solicitations no longer contain information on how to turn off the spigot.
February 27, 2007 11:26 AM | Reply | Permalink
What we need is a national usury law. Because Delaware (the state where most credit card companies are located) does not have any law limiting interest rates or fees, there is no limit to what lenders can charge. This lack of oversight and regulation has left the financial industry ripe for abuse.
Is it any wonder that we are in the position we are today?
Satellite Sky Blog
Find the Truth. Do Justice.
February 27, 2007 11:58 AM | Reply | Permalink
Delaware...isn't that where Biden's from? Thank you Senator Biden.
February 27, 2007 12:14 PM | Reply | Permalink
Stuff everything back into the "pre-paid envelope, along with some sand, and mail it back to them!
Jan Knaus
February 27, 2007 12:22 PM | Reply | Permalink
And what politician has consistently taken on the credit card industry?
February 27, 2007 12:57 PM | Reply | Permalink
Frontline has an excellent piece on how the whole CC industry got card banche on rates and setting the terms on issueing cards. A banking industry (Washington type guy) representative even states that he has a hard time wading through the details of the agreements that go along with the cards. Just what is Joe Consumer gonna do - just not read the darn thing!
The Secret History of the Credit Card.
http://preview.tinyurl.com/5mtm8
Also mentioned in the piece was the Office of Comptroller of the Currency (www.occ.treas.gov). Looks like they are charged with oversight (or lack there of) of the banking CC industry. Not sure how effective they really are. Frontline does one case that illuminates how they pressured state GA's to accept not so favorable settlement terms when banking industry was guilty of some grevious issues.
February 27, 2007 2:17 PM | Reply | Permalink
Sen. Chris Dodd (D-CT) has tried repeatedly to get some laws passed - stonewalled. {see Frontline reference below}
February 27, 2007 2:18 PM | Reply | Permalink
I think South Dakota (Citibank moved their processing center there) was actually the first state to allow no caps on rates. Delaware just passed new laws to make sure they got a nice chuck of the action as well.
February 27, 2007 2:20 PM | Reply | Permalink
The argument made supporting the Bankruptcy Act Reform Fiasco ('BARF') was that when there could be fewer deadbeats we would all benefit by lower interest rates.
Anybody getting lower interest rates yet?
February 27, 2007 3:52 PM | Reply | Permalink
Delaware's corporation laws are a scandal, too. If you get involved in a closely held corporation, make sure it is not incorporated in Del.
February 27, 2007 3:55 PM | Reply | Permalink
I wish I was only getting 73 offers a year. Most days I get multiple offers. I got seven in one day not so long ago.
Send them back empty. (Don't put sand in them, as someone suggested - that will only get you a visit from the police.) But if enough people send them back empty, the postage costs will start to eat into their profits. Not much, but enough so that it will become cost-effective for them to focus their mailings on actual potential customers rather than stuffing every mailbox in America.
February 28, 2007 2:28 PM | Reply | Permalink
I think it's time for Democratic presidential candidates to brazenly address this issue --- as in, supporting the tax treatment of credit card interest in the same way home mortgage interest is treated. Now, THERE'S a way to talk to the middle class!
March 1, 2007 7:27 AM | Reply | Permalink
This is a fantastic report that Frontline did. I have since contacted the OCC and found that they really don't have any power to enforce anything. There has been testimony before Congress to that effect as well. The banking industry can break laws all it wants as long as they don't care about getting sued, or can avoid it. The OCC will just write them a letter, and file their response, which will be some excuse written by an attorney. That is one reason they have clauses prohibiting class action suits, and have mandatory arbitration. They keep legal disputes out of public record, and avoid litigation from customers. The industry has little accountability these days.
Jim Anderson
The Truth About Credit
Facebook Profile
March 1, 2007 9:03 PM | Reply | Permalink
I am proud to say I don't have any credit cards except for my bank card. That's it. I also like to cut the cards up in teeny-tiny pieces and return them in the postage-paid envelope to the company.
It may not do any good, but it provides me with a temporary sense of power and control.
March 3, 2007 4:20 PM | Reply | Permalink
I heard Elizabeth on "Fresh Air" today and emailed her about this idea I would love to get off the ground. It was suggested I check out her blog. So here I am. What I wrote was:
"Like probably everybody else, I receive many card solicitations in the mail. I put everything into the reply-paid envelope, including the envelope the solicitation came in, and send it back at their expense. If everybody were to do this it would help the post office and perhaps discourage the card companies from destroying so many trees. Is this futile? Could this practice somehow become universal? Maybe I should make a MySpace page about it..."
Any comment on this?
March 27, 2007 8:43 PM | Reply | Permalink