Credit Card Debt Management

The Consumerist had an interesting post recently. It seems the recent fight against credit card companies recruiting students on campus has legislators up in arms and lenders getting creative.

The Iowa City Press-Citizen reports that state legislators are aiming to curb Bank of America’s credit card recruiting efforts on state college campuses. Ohio Attorney General Mark Dunn recently sued credit marketers with Citibank ties for advertising “Free Burritos” available to hungry Ohio State students. The advertisement failed to mention that students would be required to complete a credit card application.

Syracuse University has a ban already in place against on-campus credit card marketers. Marketers are also prohibited from giving gifts in exchange for credit applications under university guidelines. Citi decided to go just off campus to the Pita Pit and hand out free food in exchange for the completion of forms that allow mtvU credit card applications to be mailed to the consumer. Sneaky, sneaky. Of course, the event was heavily marketed with on-campus flyers, but the actual dirty deeds were done off campus.

Really, something must be done, and sooner rather than later. Legislators seem to be slowly trodding their way toward that goal.

Interesting trend here. UK-based HSBC, having recently dropped all subprime mortgage lending because that division of its American business is “no longer sustainable,” has decided the American subprime market is still worthy of credit cards. Lots and lots of credit cards. Subprimers are statistically more likely to make minimum monthly payments and rack up late payment fees, analysts say.

According to the Sept. 4 edition of The Boston Globe, credit card issuers like Capital One have in recent months drastically ramped up their credit card mailings wooing subprime borrowers. Leading the charge? HSBC, with subprime credit card mailings in the first half of 2007 that more than doubled the number sent out in the same timeframe a year ago.

Meanwhile, Washington Mutual, whose web site boasts an effort “to be a leader in the subprime mortgage industry,” is also scrambling to downsize its subprime mortgage marketing efforts. That company has also increased subprime credit card mailings, by about 35 percent.

At least Washington Mutual claims to be targeting the upper end of the subprime market, consumers with credit scores of 600 or above. Perhaps this is what the company meant when it told the Associated Press earlier this month that it has been “anticipating and preparing” for the subprime mortgage fallout for the last 18 months. The company claimed to have taken “strategic actions” to “weather this market” and “take advantage of growth opportunities.”

Let them all have credit cards! How generous. While credit card companies have been trying so hard to hand out more debt opportunities to subprime consumers, the number of credit card offers they’ve mailed out to those with good credit has decreased significantly, according to the Globe. Makes perfect sense. Washington Mutual, HSBC, they’re all bloodsuckers. You’d think they would have learned their lesson, but there is currently no way for subprime consumers (or subprime lenders) to benefit from mortgage refinancing so credit cards have become a cash cow.

This goes back to what I said in a former post: Never assume that because credit card companies are mailing you offers again, your credit score is improving. There is always an agenda, and consumers must be savvy enough to identify it.

The credit industry’s generous attitude toward lending is in the process of correcting itself … big time. According to a recent post by The Consumerist, a recent Consumer Action survey shows up to 75 percent of banks are lowering credit limits to protect themselves from risk.

Banks, credit card companies and mortgage lenders gave away generous offers like candy to people who, more often than not, had terrible credit and horrendous spending habits. Now, we are experiencing the subprime fallout. People like Len Bryan, quoted in a report by a Los Angeles ABC News affiliate, are paying the price. Bryan, an on-time payer who had not made any purchases on his card, saw his credit limit run out when the company slashed it by 90 percent.

If this happens to you, know that it could affect you financially in a couple of ways:

Not to be a doomsayer, but this is important news to know so you can keep an eye on those credit card notices you receive in the mail … you know, the ones you normally toss aside. Check online credit card records too for more timely updates.