By Dave Shiflett Just in time for the holiday spending binge, PBS shines a bright light on the credit card monster. “The Card Game,” which airs Nov. 24 at 9 p.m. New York time, may make you want to strangle a banker or two -- an easier target than the ultimate problem: our national enthusiasm to buy now, pay later. Americans use cards for about 100,000 transactions a minute, the show says, and while individuals bear responsibility for profligate spending, credit card companies have made it easy to go deep in the hole. Host Lowell Bergman gets the ball rolling by interviewing former Providian Financial CEO Shailesh Mehta, a pioneer of “stealth pricing” and other creative strategies that earned his company around $1 billion a year. Mehta is a suave guy who lives in a slightly miniaturized copy of the White House. He illustrates how easy it is to put yourself in debtors prison. Mehta opens a card offer from Bank of America boasting a zero percent introductory APR. He notes an asterisk and when reading the small print discovers “my APR is 11.9, 15.9 or 19.9” Bottom line: “I have no idea which one I am going to get when they approve me.” Many card holders, the show says, are also unaware of various fees that can turn that little piece of plastic into a truly toxic asset. Credit card debt played a role in the economic meltdown, says consumer advocate Martin Eakes. “We are focused on the current economic crisis as primarily a foreclosure and mortgage crisis,” he says, “when the sub-prime lending was really taking off, it was largely a mortgage product to refinance credit card debt.” Robert McKinley, CEO of CardWeb.com, adds that consumers refinanced their homes to pay off their credit cards, then “they would go out and charge them back up again.” What, we worry? In another dose of bad news, McKinley notes that debit cards “can be under certain circumstances even more expensive that credit cards.” The chief trap is overdraft protection, which isn’t always free. A consumer named Josette Wermuth explains that a stalled deposit meant she couldn’t cover a $7 pizza purchase. The bank covered it for her, but charged a $33 fee, which the show says is the equivalent of an annual interest rate of over 24,000 percent. Some lenders also process larger charges first, even if they occurred later in the month, which can empty an account and create numerous overdraft charges (or opportunities, if you’re doing the lending.) So who’s going to save us from all this? While Congress passed reforms in May limiting the practice of arbitrarily changing interest rates, Harvard professor Elizabeth Warren says the reforms are “a modest step” and that the industry “instantly set to work on how they could run around them.” Warren and the Obama administration are putting their chips behind a new Consumer Finance Protection agency, which would have regulatory powers across the lending world, including payday lenders, whose storefronts outnumber Starbucks two-to-one, according to the show. Yet several big dogs have lined up against the plan, including Sen. Richard Shelby, who calls it a “radical departure from the way we have regulated.” A truly radical step – limiting the amount of interest than can charged -- is a dead letter, the show indicates. No matter what reforms are devised, Mehta agrees that the industry will find a way around them. Bankers, he says, have a mindset of “tell me the rules, and then I'll outsmart you all.” He also adds that the ultimate problem lies elsewhere: “Lending money to people is never a difficult exercise. Okay?” All of which leaves us with the cold fact that the most effective reform is a pair of scissors.
