There are credit cards out there for subprime borrowers, too - it's not just mortgages. That means a new class of supposed victims for reporters like ABC's Chris Cuomo to defend.
Cuomo's segment on the March 27 "Good Morning America" hammered away at the credit card industry, claiming consumers were "getting sucked in by attractive offers" and being "trapped" by "fee-laden cards." He said to him, the whole thing seemed "wrong" and that companies were "squeeeezing" (he drew out the word) cardholders.
"But with these fees - account management, and all these clever names you have for them - that's not about borrowing," Cuomo accused. "That's about squeezing it out of them before the game even begins. Isn't that unfair? Isn't that past the line?" Cuomo pressed Chris Stinebert, president and CEO of the American Financial Services Association.
The story centered on 19-year-old Celina Alvarez, who got a credit card to pay her college tuition but then discovered her purchase wasn't the only charge.
"I didn't understand it to begin with," Alvarez said. "But then when I saw all those little small charges, I was like, that's ridiculous." According to the ABC story, the card included an "$100 origination fee" and a $10.95 charge that Cuomo called a "monthly maintenance fee."
What Cuomo didn't explain, however, is that Applied Bank, which issued Alvarez's card, deals specifically with subprime borrowers who might have trouble getting a credit card otherwise. According to Hoover's, a reputed source of business information:
"Applied Card Systems is the servicing arm for Applied Card Bank (formerly Cross Country Bank), a subprime consumer lender that issues secured and unsecured credit cards to customers with dubious or limited credit histories. Applied Card Systems processes payments from and provides customer service to holders of subprime Visa and MasterCard accounts from offices in Florida and Pennsylvania."
Companies that supply such cards have to factor in their clients' credit histories, as Stinebert explained: "Do we make people that are paying on time pay a higher rate and have fewer options, and, or do you make the people that are not making the payments on time have to pay according to what their risk, analyzed, really is?"
