Credit Cards-Regulations or Reinvention

Many countries are pushing forward on credit card reforms while media attention continues to be strongly focused on negative practices and over-done public relation excuses. Australia was the early leader in reforms, allowing retail merchants to charge customers more for using credit cards. Our friends south of the border in the House of Representatives passed a credit card bill of rights last September which prohibited arbitrary or excessive changes to card features. In Canada, we have the Senate holding hearings on credit card fees and rates. Concurrently, the Competition Bureau is investigating if the industry has breached the "abuse of dominance' provisions as it relates to interchange fees. (Note: Visa and MasterCard control 94% of the Canadian market.) Similar studies are progressing in Australia and the United Kingdom.
Unfortunately, the public position by the banking industry continues to be that "interest rates are higher on credit cards because they are high risk loans". We all know that in most countries the average adult carries multiple cards and the user segments mirror the marketplace with perhaps too many cards granted to higher risk individuals. In fact, in the latter segments the credit cards have pushed many into bankruptcy with interest rates around 20% calculated in a variety of ways with no offers for debt management counseling and solutions.
The credit card companies and their intermediary financial institutions need to sit back and re-invent themselves in a consumer-centric manner and apply new principles and practices supported by empathetic public relations statements. The institutions should seriously assess the mountain of retailer and consumer complaints as well as their callous practices and "mass marketing and operations psychology". Consumers have many borrowing products available depending on risk management needs and scores i.e. mortgages, personal loans, credit lines, overdraft protection, credit cards, etc. Normally, risk assessments on individuals and businesses establish higher costs with higher risks. Actually, customers are segmented by credit scores, demographics and other measurable dynamics. When defaults or bankruptcies happen, the costs are associated with the accounts involved whereas with credit card policies, appearances tend to indicate that it is more a big melting pot of costs that are then allocated to everyone and everyway possible as the recovery strategy.
Credit card fraud and defaults are high! So, why continue marketing and operating practices that contribute or don't curtail these negative results? The whole culture has to be re-invented with credit cards where prospects and customers are treated in a positive proactive manner to prevent fraud, defaults and bankruptcies. It is time to think outside the box before governments have to take further steps of regulatory intrusion into this business.

Pat Palmer | Monday, March 30, 2009 | Comments (0) | Trackbacks (0) | Permalink