Recently, I told you about the efforts of some credit card companies to begin offering simple or “vanilla” credit cards. This effort appeared to be a reaction to President Obama’s call for simplified financial offerings for consumers in the wake of the banking crisis.
An Product Or A Tactic?
At the time, I took the credit card companies at their word that they were trying to offer consumers what they wanted. Over at the Huffington Post, Dan Geldon has a different take on why these offerings are cropping up. In his article “Don’t Believe the Hype! Credit Card Sharks Still Hate the Taste of Plain Vanilla”, Geldon tracks the bank’s recent flip flop from not approving of simplified offerings, to seemingly jumping on the bandwagon.
A few months ago, it seemed liked the industry had a hate-hate relationship with this simple idea. Industry groups alleged that plain vanilla is a fancy term for the government “choosing” products for customers……today, it seems like the industry has a love-hate relationship with plain vanilla. It loves plain vanilla in that it is apparently embracing it, at least if you look at their marketing campaigns — that is, their marketing campaigns for plain vanilla products, not their marketing campaigns against plain vanilla products……they’re lying. They’re pretending they love plain vanilla so that the perceived need for Congressional action fizzles, so that CFPA slowly fades away, and so that the public feels safe and protected by a working marketplace.
The idea is that their newfound support of simplified credit cards is merely a ruse to forestall legislation that would protect consumers, the so-called Consumer Financial Protection Agency. Geldon cites Citibanks short lived move to curtail universal default as an example of how companies try to offer up insincere solutions in order to kill or postpone regulatory legislation. This is a tried and true tactic across many industries. Airlines created all sorts of customer care initiatives in the last 10 years in a successful effort to kill passenger rights legislation. So far, airlines still trap people on airplanes, service has only gotten worse, and yet there is still no passenger bill of rights.
My Take
I think Geldon’s theory has some merit. If credit card companies were genuinely offering simpler products, that might take some wind out of the sails of this movement. Unfortunately, these offerings appear to be limited to a few credit card companies, and only then on a few of their products. Furthermore, there is no reason that these features can’t disappear quietly after Congress has moved on to tackle some other issue. When the CARD act was passed, I predicted that banks would try to adapt to the new rules by coming up with new fees and other practices to skirt the intent of the legislation. The CFPA would act kind of like the Consumer Product Safety Commission that regulates the physical safety of goods. The CFPA would regulate the safety of financial services such as credit cards and mortgages.
My regular readers will not be surprised to learn that I support common sense legislation such as the CFPA. I am not so cynical that immediately suspected the “vanilla card” offerings were merely a ploy. I think it is possible that they are both a ploy to forestall legislation and a genuine attempt to market simpler cards to consumers. I imagine that the executives who approved these offerings thought that they were killing two birds with one stone.
After years of little action on consumer protection issues, it will be interesting to see if the CFPA joins the CARD act as a major piece of legislation to come out of the Obama administration.
Link to the original site
Tags: Credit Card News by David
No Comments »