Credit Company Practices vs. Personal Responsibility

Filed in archive Credit on October 30, 2006

Working for a Web site about credit cards always leaves me with conflicting emotions, because I in turn get mad at the credit card companies for some fuzzy business practices, and then get mad at the people who continue to apply for credit cards and then blame the credit companies once they're neck-deep in debt: "Why are they giving me a credit card? I've proven I can't handle it!"

It's sort of like gambling. Do you outlaw Las Vegas because some people are compulsive gamblers?

Some would say you should outlaw credit AND Las Vegas AND alcohol AND whatever else has the potential to do bad things to people. I don't know.

It's an endless merry-go-round in my mind of personal responsibility versus the responsibilities of the companies that offer products/services that tempt certain customers to do things that end up getting them in trouble.

I'm on the merry-go-round again today because of this article in BusinessWeek about Capital One called "Cap One's Credit Trap". In short, the article says that Capital One offers customers low-limit credit cards, then keeps offering more and more low-limit credit cards to these same customers even if they're over the limit on their other cards. So, in the example used in the article, this one couple has 6 Capital One cards with $300 limits, all of which they've gone over on, and are now being socked with fees. In their minds, and based on the title of the article I'm guessing the writer agrees, Capital One should not have kept offering them more cards with low limits, or Cap One should've just offered them one card with a higher limit. As it is, they're getting multiple over-the-limit fees each month because all of their balances are over the low limits they've been allotted by Cap One on each of the 6 cards. If they had one card with a higher limit, presumably they would have run that one up over the limit, too, but at least they'd only be getting one over-the-limit fee each month.

This is definitely an anti-Capital One article, and that's fine. It's hard to defend Capital One for giving out multiple credit cards to the same person who had already proved he couldn't pay off any of the previous cards.

On the other hand, what's up with this guy taking on 6 Capital One cards? This guy is a business owner and presumably not completely stupid, and yet he acts as if he can't understand how Capital One could do this to him. Well... did he think Capital One wouldn't want him to make any payments? Did he think that because Capital One kept giving him more cards that it was OK to run them up to the limit because he could just get another one and run that one up also, with no consequences at any point in the future? If he was so gosh-darned angry at Capital One for giving hm all these cards at such low limits, why did he keep taking them? And why didn't he look for a different card company that might give him a higher limit? Was it because no one else would touch him because he consistently charges his credit cards beyond their limits?

No one's hands are clean on this one.

Those who've commented on the article at the BusinessWeek Web site are actually way harder on the guy than they are on Capital One. One says the article is one-sided, using a single example to accuse Capital One of trapping customers without talking to anyone else or getting any opposing views. It's a valid argument. Maybe reporters think there's no point in getting any counterpoint opinions because everyone knows that credit card companies are all crooks and since we all agree on that let's just write more stories about how they do their evil deeds.

The whole story maks me feel icky. No one comes out looking good on this one--not the debtor, not Capital One, not BusinessWeek.

Thoughts?