Educates Consumers, Grades Companies

by Jamie Walden  on Monday, Jan. 18, 2010 12:00 am  

Curtis Arnold

Much of that loss will come from the requirement that credit cards curb existing fees.

"They've counteracted by rate-jacking and introducing new fees that we've never seen before in this industry," Arnold said.

"An example would be an inactivity fee. If you're using a reward card and you make one late payment, then they're going to basically hold your reward points hostage and charge you a fee to be able to redeem your points."

And this is only the beginning, Arnold said. "We're going to see a lot of other junk fees," he said. "The industry's going to offset this [lost] revenue."

Arnold related a cautionary tale of a new predatory offer that illustrates the lengths to which some firms will go to make a buck: A 79.9 percent interest rate offered by First Premier Bank of Sioux Falls, S.D.

"Can you imagine someone that's recovering from bankruptcy, that's trying to claw their way out, that has fixed income, maybe they're unemployed, and they can't get credit because their credit is trashed. And suddenly they get an offer in the mail from First Premier Bank saying, 'We'll help you rebuild your credit.' And they have no clue about interest rates and the interest rate on the account is 80 percent. That's scary stuff," Arnold said.

But an educated consumer can dodge such a bullet. And Arnold says that holding on through the bumpy short-term will be worth it because the legislation will effect positive change.

"So we're trying to educate consumers that, hey, this is, long-term, going to be a positive. But we're going to have a lot of hiccups. And you need to be aware of what's going on because this affects your pocketbook. And if you're fed up with the big boys, we think this is a great opportunity to highlight a bank like Simmons or like Iberiabank or the Arkansas Federal Credit Union," Arnold said.

Though the legislation may have inspired some new fees, the industry does show signs of positive change, Arnold said.

"I think we're seeing now that some of the big boys are starting to wake up a little bit. And you can argue the motivation. I mean, it's not like they're doing this strictly out of a kind, compassionate concern for consumers. But I think they're starting to realize that, 'We're going to have to be consumer friendly because we've got a target on our backs. And we're going to have to figure out a way to be profitable and consumer friendly,'" Arnold said. "And I maintain that it can happen."



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