Money for nothing
By Consumers Union on Thursday, November 15th, 2007
A new study exposes subprime credit cards with high start up fees.
Money for nothing, a new study exposes subprime credit cards with high start up fees
The National Consumer Law Center (NCLC) released a new study exposing the abusive practices, called “fee harvesting” of several issuers of “subprime” credit cards. The credit cards, with names like “Aspire” and “Premier” are marketed to low income communities as a way of repairing bad credit. According to the study, the card issuers market hope and opportunity when what they’re really pushing is a credit card loaded with upfront fees that significantly reduce the amount of usable credit. As a result, card holders go into debt for the fees but get very little buying power from the card. The NCLC study detailed how, after charging $178 in upfront fees on a First Premier card, with a credit limit of $250, the consumer purchasing power is reduced to just $72.
The same bad actors. According to the NCLC study, the issuers of subprime “fee harvesting” credit cards include several banks which have previously run afoul of federal regulators. The study underscores the serious need for vigilant oversight by federal regulators and more effective consumer protections against these types of money for nothing schemes.
To read the NCLC study click here: