Credit card companies are evil
This just in: credit card companies are evil.
But increasingly, they say, what should be a warm embrace has turned into a painful squeeze as lenders employ new tactics to extract more and bigger penalties for even the slightest financial transgressions. In the last few years, lenders have more frequently raised customers’ rates because of slip-ups elsewhere, like late payment of a phone or utility bill, or simply because they felt a customer had taken on too much debt.
The practice, called universal default, started after a rash of bankruptcy filings in the mid-to-late 1990’s and has increasingly become standard in the industry. While MBNA declined to comment on any specific customer’s account, its general counsel, Louis J. Freeh, the former F.B.I. director, said in a statement that it was being prudent by raising rates when it had reason to think the risk of not being repaid had increased.
This is joint investigation between the Times and Frontline, so if you happen to catch Frontline this week, make sure to watch it.
And, this may be the squishiest defense of price-gouging ever:
But MBNA, in the statement from Mr. Freeh, said: “If we see indications that a customer is taking on too much debt, has missed or is late on payments to other creditors, or is otherwise mishandling their personal finances, it is not unreasonable to determine that this behavior is an increased risk. In the interest of all of our customers, we must protect the portfolio by adjusting a customer’s rate to compensate for that increased risk.”
