I agree that there is a ton of room for improvement in how this is communicated to the customer. I just thank my lucky stars that I am not in this part of the industry.
There are always errors in predictive models. Prediction is something that the human race on the whole does very badly. We cannot predict the weather, markets, or political outcomes very accurately at all. So when credit cards make predictions about the behavior of millions of people, they are going to blow it some of the time. It’s the people who they are wrong about who end up in the newspapers, not the thousands (or millions across the industry) whose credit gets cut a month before they default. We don’t like being wrong: it hurts business, it hurts people, and it obviously stinks. It is just one among many terrible challenges the industry is facing right now.
Quoting THE FIRST PART OF A SENTENCE, without the second part that contains the core of the argument, then contradicting just that first part is a big ol’ FAIL. The POINT of that sentence was not to say there shouldn’t be rules, but that the rules are not disclosed to the people to whom they apply. My next sentence expanded the argument that these rules are often changed in the middle of the game.
If you’re going to defend against a point being made, then defend against the ENTIRE point. In fact, take the totality of the post into consideration when forming your counter-argument. You are taking statements and partial statements out of context and, yes, picking nits. I said at the end of my post that no one should argue against managing risk and making profit. It is the underhanded, secretive, judgmental way in which this is done is what has people pissed off. Cutting people off or raising their rates when they fall into a certain purchased-based statistical bucket, DESPITE evidence that contradicts any risk that might indicate, is unfair and downright sleazy. You can paint it any way you like, that doesn’t change the fact that it stinks to high heaven.
If you want to talk about managing risk, one wonders why all of this attention and statistical mojo wasn’t applied to evaluating sub-prime mortgages. Many of the same companies that ply their trade by yanking around individuals were involved in buying “financial products” that were backed by sub-prime mortgages. That’s another thread for another day, though.
CC companies want to make money? Great. Do so fairly and honestly, then. Stop trying to trick your customers, stop changing the rules in the middle of the game, and fully disclose in plain English what the rules are. Stop holding people’s lives hostage.
I am just going by what you are actually saying. “There is a trend to make up rules…” was part of your general condemnation of the industry. I have a credit card agreement and statements that show what my rate is and what the terms are. One of those terms is the fact that this can change.
There are some reprehensible industry practices, but this just isn’t one of them. I believe that the payments hierarchy rules, universal default, and a host of other things in the industry badly need to be changed and will be changed. Some issuers are also far sleazier than others. But have you ever actually read a credit card agreement? It would be great if they could be more concise and less full of legalese, but it would also be great if people wouldn’t constantly try to sue credit card companies.
Because you are conflating issues, repeating half-truths, and as I will point out below, you simply do not understand what you are talking about.
“Judgmental”? Seriously? There is no normative component to it whatsoever. No one decides arbitrarily which behaviors are desirable and which aren’t. It is a purely data-driven exercise. Out of 1000 people, 999 of them who look like ducks and quack like ducks actually are ducks.
There is nothing either secret or underhanded about this. The alternatives to secretive and underhanded would be invasive and privacy-violating. What other sources of information do you propose a credit card issuer use? A hard credit inquiry? Your last six months of bank statements? A verification of your income and job title? How about your tax returns? You are a small business owner? Send us your general ledger and documentation for your uncollected receivables.
Would anyone like this?
Evidence to the contrary? I think this is where you are misinformed. Please try to understand this.
Not a lot of information is conveyed from a soft credit bureau inquiry. Furthermore, borrowers often can look very good until right before they default. The goal of predictive modeling is to intervene before a borrower shows obvious signs of imminent default because once that happens, it is too late. There is a great deal of evidence on a portfolio basis that this actually works. As I mentioned earlier, these models are indeed wrong on individuals, and that is an unfortunate fact of life. But on a portfolio basis, they are accurate.
No one likes to be “judged” or whatever. Yet this doesn’t seem to stop people from applying for credit cards in the first place or for trying to have their credit limits increased. But when the shoe is on the other foot, well, then it’s different. No one wants to be judged negatively.
The amount of mojo required to securitize and hybridize mortgages was pretty incredible. The failure wasn’t in the mathematics but in the unlimited demand from FNMA, the criminally low banking spreads, and the consequent lack of due diligence. This drove a lot of very bad business decisions.
Holding peoples’ lives hostage? Do you really believe this stuff?
This is also how credit card rewards programs tend to work (ie get 5% cash back on clothing, electronic furniture, & gasoline). The gas pump itself has a different MCC than the register inside; so if your card gives 5% back on gas you have to use it at the pump, or you won’t get your rewards.
It depends. Porn mags bought at a normal convenience store or newsagent show up as that, but speciality adult stores have their own MCCs. Hell so do escort agencies and brothels. I actually once had to tell a client that the charges she couldn’t identify were from a brothel (which just happened to be at the same time her husband was in that area on business). Talk about an awkward conversation.
For me? They’d learn that I a) never eat at home, b) never drink at home, C) love convenience stores and iPhone apps.
What’s interesting on their end is that I feel we taught them a thing or two a few years ago when credit cards/debit cards were unbelievably paranoid. My Chase credit and debit cards were frozen 3-5 times a week. Why? Well, I would spend $20 at a gas station, later $10 at a convenience store, then later $30 at a bar/grill. Why freeze it? Well, al three purchases are in three different ZIP codes. Ergo, must be stolen.
Thing is, I live in Southern CA, I drive 5.4 miles to work and I pass through seven different ZIP codes. It seems they didn’t have a population or ZIP code map.
What got me once was when I travel east to visit the parental units, I buy $10 worth of items at a drug store on the Atlantic coast (things I forgot to pack), next Atlantic coast purchase is DECLINED! Here came the automated phone call asking me to press one if I purchased $10 worth of stuff at a drug store across the country. I complained while explaining that the plane ticket that took me to the east coast I also bought on the same card, why do you think this card is being used where I landed??
