part -4💢
Providian is specialized in high-risk customers with very low credit scores. PAT WALLACE, Bay Area Better Business Bureau: They targeted people with questionable debts, or small debts, people who could not get bank cards elsewhere.
FOLLOWER: Pat Wallace is the head of the Business Business Bureau in the San Francisco area.
PAT WALLACE: The first thing that caught our attention was the facts, the numbers, the complaint numbers.
Providian was involved in all kinds of questionable offerings and policies and procedures and operations.
FOLLOW: Complaints about Providian from all over the country came here at Wallace's office.
PAT WALLACE: The provider, for example, accepted payments from customers into their accounts, depositing checks but not crediting the account sometimes for up to a few weeks.
What was the result? Consistently, the buyer received a late payment. LOWELL BERGMAN: They withheld payments so that they could charge late fees and overdraft fees and— PAT WALLACE: Excessive fees. Fifty percent of their income was a tax, not the interest on the loan. He pushed the envelope.
And they kept at it for a while, and they made a lot of money. LOWELL BERGMAN: The Office of the Treasurer is the main state agency for handling complaints. Did they come to help you?
PAT WALLACE: No. They are simply not interested. You know, the answer was, "Well, you know, we'll take it here. We'll watch it from here." You know, "It's not a problem at the moment for us."
FOLLOWER: Providian's complaints also assisted June Cravett in the San Francisco Regional Consumer Protection Unit and she began investigating, eventually drawing the attention of the local media and then getting a call from the OCC.
LOWELL BERGMAN: Have you ever heard of the Financial Management Office? JUNE CRAVETT, Asst. DA, San Francisco: The answer in my opinion is no. He did not know more about it.
They did not know exactly what they were doing and who they were controlling. We have never heard of them being very active in consumer litigation or consumer enforcement measures.
FOLLOWER: When the OCC contacted June Cravett, she said instead of cooperating, they issued a challenge.
JUNE CRAVETT: There have been a number of meetings where the issue of freedom has been raised. LOWELL BERGMAN: Release?
JUNE CAVETT: Yes. That's where they say, "Because we are federal regulators," that they have special authority over the national banks, therefore, we have no administrative power.
LOWELL BERGMAN: You, in San Francisco, have no control over you? JUNE CAVETT: Yes. LOWELL BERGMAN: The attorney general of San Francisco states to us they were told, "You have no real administrative power, we have real authority," and he showed them that.
They may want to get out of the case. JULIE WILLIAMS, Acting Director, OCC: How it happened when we worked together and the San Francisco Regional Attorney's Office. It was a collaborative process.
LOWELL BERGMAN: But they said that once you came in, it was very fruitful. JULIE WILLIAMS: That's right. LOWELL BERGMAN: They tell us that the OCC only got involved.
When the whole situation was already public before the news broke that they were responsible. because they had no contact with the OCC. JULIE WILLIAMS: We worked with them to find out what it was we continue. FOLLOW: The joint investigation eventually reached $ 300 million.
Providian declined to comment further and issued a statement saying, "Instead of revisiting the past, the company focused on" services ... that provide real benefits today. "
In Washington, the OCC has been tightening its grip on power and trying to curb consumer coercion actions by local prosecutors.
This sparked a nationwide war, led by attorneys general in all 50 states. ELLIOT SPITZER, NY State Atty. General: The OCC is now trying to squeeze the state's presence, to prevent it from protecting consumers, which I think ultimately hurts consumers more.
FOLLOWER: Elliot Spitzer is the attorney general for the state of New York. ELLIOT SPITZER: We receive thousands of complaints every year regarding credit card issues involving major banks, major card issuers. So we get these complaints, and we try to deal with credit card companies.
But increasingly, over the years, we have heard from the central banks, in various cases, that "We do not need to deal with you because the OCC has told us - indeed, to direct us - not to deal with organs of state."
LOWELL BERGMAN: Is this not just a turf war between the provinces and the federal agency? ELLIOT SPITZER: It's a one-way turf war.
And with that, what I am saying is that we are very happy to acknowledge that the OCC has the authority to manage the financial system when it comes to certain matters.
What the OCC is trying to do is to squeeze the provinces into one area where we have used it in an amazing way, which is to protect consumers.
LOWELL BERGMAN: Attorney General, Mr. Spitzer, and others say "People in our region know who we are, we have a consumer complaints office. And our beef, that you, OCC," wants to push out of the consumer complaints business.
JULIE WILLIAMS: We do not want to expel them from the business. We are both there to protect consumers. What we strive to do is to be individual, and to develop programs.
And provinces, find the best way to work in partnership with them. FOLLOWER: In January 2004, the OCC declared itself the sole regulator of all national banks, successfully vaccinating large credit card manufacturers in many state consumer protection laws.
The OCC cited the Providian case as evidence of its commitment to consumers. JUNE CRAVETT: I was disappointed that they used Providian as a prime example of their power and will to enforce consumer laws.
LOWELL BERGMAN: For you, they were not the white hero who came to San Francisco and saved the customers in Providian. JUNE CRAVETT: No, we were not.
FOLLOWER: Since the Providian case, the OCC says it is aggressive, having recently issued a statement warning banks to mislead the public with practices.
As zero percentage of presentation prices and universal default. Prof. ELIZABETH WARREN, Harvard Law School: The OCC itself has acknowledged that these practices, as it explains, are extremely troubling.
But notice what they did not do. They did not say, "And we will forbid them. Stop them. That is wrong. unsafe and unhealthy, and do not do it. ” Instead, they say, “It's a problem”?
Think it is a problem, and tell credit card companies to stop doing it! LOWELL BERGMAN: Why don't you just stop them? Why not prevent these practices? JULIE WILLIAMS: When we see habits that can be problematic, we take a variety of actions.
LOWELL BERGMAN: So you can tell them to stop, and they'll have to do it. JULIE WILLIAMS: If we had a basis for concluding that the bank was involved in a fraudulent or fraudulent transaction if it violated any of the many consumer protection measures that apply to them, we would tell them to stop immediately.
FOLLOWER: No matter what the OCC does, Pat Wallace says it has not yet stopped the Better Business Bureau from filling out complaints.
PAT WALLACE, Bay Area Better Business Bureau: It is not a risk that the bank/credit card business, has generated more complaints, nationally, nationally, than in any other industry. Now, what does that mean for you?
Of the 1,000 industries we follow, they are the best. I would say there is a problem here. These things are not complicated. All these complaints are well-founded. There are angry, unhappy, dissatisfied customers in the industry.
And we see it. LOWELL BERGMAN: The Better Business Bureau tells us credit cards and bank and credit cards together, the first problem. JULIE WILLIAMS, Acting Director, OCC: For all types of complaints? LOWELL BERGMAN: Yes.
JULIE WILLIAMS: I would think that, like, cable, and satellite installation or— LOWELL BERGMAN: No, I think, you guys.
JULIE WILLIAMS: - used car dealers or something. LOWELL BERGMAN: Your members are in their midst. JULIE WILLIAMS: That I would never have thought that it was. FOLLOWER: Critics like Elizabeth Warren believe there could be fewer complaints if.
The credit card industry has revealed how its business operates, especially when it comes to low monthly payments.
Professor ELIZABETH WARREN: If people knew that the monthly payment was due to pay for a trip to the mall for the next 35 years, some people would probably decide to pay more than the required amount.
And the industry knows that. That's why they don't want to say it. LOWELL BERGMAN: You advertise on your bills how much your monthly payment is, but you do not tell people how much that would cost if you stick to that small payment. Why not?
ED YINGLING, American Banking Association: Disclosure would be 99 percent of the time because no one - almost no one - pays the minimum amount, that minimum, monthly for 20 years and has never charged anything else.
This will be a hyper-technical disclosure, expensive that no one can understand. We are therefore against disclosure that no one can understand and that is wrong. We are for disclosures that help people understand. It's that simple.
Prof. ELIZABETH WARREN: This is nonsense! In the line directly below the line "small monthly payment," there is a simple sentence that can be added.
"If you make small monthly payments, it will take you," how many years, 35 years, and how many months, "to pay off this debt." FOLLOWER: A man who takes on debt by setting up a small 2 percent payment thinks that exposing too much is useless.
ANDREW KAHR, Credit Card Coordinator: This is interesting, from time to time, an ax-wielding person or someone who thinks he or she is going to help consumers have that in mind.
But if we had a tape and used a computer to record 10,000 customer service calls with questions, OK, I don't think you would ever hear that question. So I'm confused about its performance.
I don’t think that’s what consumers want to know because they don’t expect to make small payments permanently.
LOWELL BERGMAN: Do you know that if you made a small payment, for example, to your building, how long would it take you to pay it?
FIRST CREDIT CARD USER: I'm in no hurry to get it. I'll just pay. LOWELL BERGMAN: Would you like to know? FIRST CREDIT CARD USER: Absolutely.
SECOND CREDIT CARD USER: It would inspire me to put down more. It can inspire me. And I think that's probably why they didn't put it down.
It can encourage more people to pay more than the minimum amount. Sen. CHRISTOPHER DODD D, Connecticut: Almost everyone who owns a credit card can, in a sense, be subject to the current laws and provisions, which can be fully exploited by the credit card industry.
So there is a trick going on to get into the game. If you are logged in and I have logged in, if you log out, I will charge you. If you do not meet your obligations, I will charge you. You go left, you go right, I got it.
LOWELL BERGMAN: So what are you going to do about it? Pastor CHRISTOPHER DODD: However, I have a law. I am in debt.
That is always a quick response here. And I don't know how far it will go because I've tried this before. I am not new to the subject.
The good case of the credit card debt we see in America is asleep on how the procedures are followed by credit card companies.
FOLLOWER: In the summer of 2004, Sen. Dodd introduced a credit card change bill that, among other things, would require credit card companies to disclose how long it would take consumers to pay their balance.
But he has no hope that the bill will pass. Many of his previous attempts to change the credit card business have all failed. LOWELL BERGMAN: Why can't you or other lawmakers put certain rules in place? Is it their political power? Sen.
CHRISTOPHER DODD: Yes. There is no question about it. I mean, every time we try to give the law this industry has become very powerful, and very successful in overcoming all the legal efforts made over the last few years to put a responsibility on the part of this credit card industry.
LOWELL BERGMAN: Your critics say you are blocking all efforts to pass industry reform or consumer protection legislation.
He has restricted the minimum monthly payment rules, interest rates, and marketing bans for college students. EDWARD YINGLING: We have done our best to prevent bad debts. Those are bad debts.
And we will continue to do everything we can to stop them. LOWELL BERGMAN: Bad? EDWARD YINGLING: Not good for consumers.
Sen. CHRISTOPHER DODD: I want to promise you something today. Please continue to defeat the ideals like this and look back and wish we had passed this law because I will tell you that the ANC will come and take very serious action. in their view, there is nothing I suggest.
I just suggest disclosure, just let people know what the agreement is. Prof. ELIZABETH WARREN: I think there is a time when the American consumer is at the forefront of this issue, and it will not be fair for credit card companies, if they are in financial trouble, to change interest rates, charge them fines and penalties.
So that they simply decide that the terms of their original contract are no longer contractual. I think that day is coming. FOLLOWER: Even someone in the industry like Duncan MacDonald, who has worked for Citibank for almost a long time.
For 30 years, he was very worried. DUNCAN MacDONALD, Fmr. Citibank General Counsel: I know enough about the industry and lawyers in the industry and there should be people sitting there who say, "We have to find a way to deal with this."
Have we reached that point yet? I do not know. But I think there is an ongoing debate. And I hope there is an ongoing debate.
What a tragedy it would be if it were not for it. LOWELL BERGMAN: What could be a disaster? DUNCAN MacDONALD: The situation is getting worse. The current situation is bad, and then it gets worse.
LOWELL BERGMAN: Profits continue to grow. DUNCAN MacDONALD: So 25 percent bad prices are 30 percent worse and late payments are $ 50 and $ 60, and so on. FOLLOWER: Back in South Dakota, a man who helped the industry start in the 1980s.
You have mixed feelings about what we have helped to create. LOWELL BERGMAN: Have you ever considered the fact that this great success, has been a great benefit to your state, at the same time you have helped to create a way to borrow money, to spend money, which may have gone out of control?
JANKLOW BILL, Fmr. Governor of South Dakota: I think the answer is yes. I mean we've become a plastic society. We have become a plastic society. Most of the time, you want to give people money, they watch you.
"Money? Money?" LOWELL BERGMAN: You have been instrumental in making this happen, in many ways. JANKLOW BILL: I never thought about this when it happened.
And I'm still happy, what I still love is what we did, and I still think it was a great opportunity for my province.
Now, when we talk about the industry with 18, 19, 20-plus interest rates, I think that something healthy for people? The answer is no. I don't think it's healthy at all.
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