Once again, we find a prominent financial institution adhering to the letter of the law in making a financial disclosure. However, while all of the disclosure appears to be written in English, it’s arrival as a free standing fold-over mailer leaves us wondering what it all means. By the way, the disclosure was received on March 3rd, 2010 … after the February 21st effective date of the announced changes.
See if you can decipher this announcement …
|
Re: Your Account Ending in 0000 Dear xxxxxxxxxx; We are writing to inform you about changes to your Account that will be effective February You have one or more variable APRs on your Account that are at the floor because the variable You may also have one or more other variable APRs on your Account that are at or above the Please keep this notice as it amends your Account Agreement. Your other Account terms remain in effect. If you have any questions, please contact us. It will be our pleasure to assist you. Sincerely, Deb Walden, Executive Vice President |
Is it any wonder that the public mistrusts financial circumstances?
- Applying overdrawn checks in reverse order, largest first, so as to generate more overdraft penalties as a larger number of smaller checks bounce.
- Using a two-month average to compute finance charges.
- Raising interest rates on accounts if any other account shown on your credit report indicates a late payment – even one that is not related to the same card issuer.
- Fully disclosing onerous terms and conditions in long, densely-worded disclosures that “amends” your original agreement which has long disappeared somewhere in your house or perhaps has been thrown out with the other numerous advertising circulars jam-packed into your mailbox.
And of course, sending you a fold-over announcement of the latest terms and conditions which you have to accept or close your account.
Is Deb Walden, Executive Vice President of Customer Experience for Chase Card Services, a real person?
One practice in large financial institutions is to assign “color” names to desks – no matter who occupies the desk, it is always Mister or Miss Brown, Green, Gray or Blue that answers the phone and provides advice. But in this case, there really is a Deborah F. Walden who is the Executive Vice President, Customer and Marketing Services for Chase Card Services.
Meet the real Deb Walden …
According to her biographic information that appeared in recent publication …
“Ms. Walden leads the customer service organization for Chase credit cards. Her team of more than 8,000 employees is dedicated to delivering superior service to consumers and small business owners who hold any one of Chase’s 147 million credit cards as well as the clients and card holders of commercial cards and electronic financial services products.”
“Ms. Walden’s team also develops and produces all of Chase’s communication materials that help customers get the most convenience and value from their Chase credit cards. At Chase, Ms. Walden is the executive chairperson of the division’s Diversity Council and sponsor of the women’s employee networking group, called WIN. She also serves on JP Morgan Chase’s Corporate Diversity Council. JP Morgan Chase has been recognized as one of the top 50 companies for diversity by Diversity Inc. magazine for the past eight years, and placed in the top 100 companies for working parents by Working Mother magazine for the past fifteen years running. Deb Walden holds a bachelor’s degree in accounting from the University of Miami at Coral Gables, Florida and is a certified public accountant. <Source>
For those curious about the challenges facing Deb, you might want to read an article on “How Chase Got Control
Of Call-Center Expenses” which appeared in American Banker Magazine.
As nice as she may be, Deb is walking a tightrope, trying to satisfy legal disclosure requirements and keeping her job by making sure that her division’s costs are as low as possible and she has exploited every legal advantage that can be taken by her company. The real problem is that we have a bean counter supervising attorneys and others producing customer disclosures which should be understandable by the average person. In this particular case, an abject failure.
Bottom line …
The best way to fight back against financial firms is to remember that, in spite of the smiling faces and happy commercials, you are nothing but a number and scored by a rigid mathematical algorithm that assigns a desirability number to your account. So the best answer is to live well within your means, reduce your outstanding debt to zero and use your credit cards as a convenience – paying them off in full each month. Then disclosures such as this have no real impact on your life and you can smile when you meet Deb in the supermarket.
-- steve
Reference Links:
CHASE SUCKS WITH NEW PRIVACY POLICY, OPT-OUT PROCESS IS PAINFUL!
Use it or lose it? I'm canceling it!
How Chase Got Control Of Call-Center Expenses
steve --
Believe it or not, the changes in the disclosure you quote are all to the benefit of the consumer (or at worst, the same as now).
First off, some definitions, in English as plain as I can make it: a "variable" rate is an APR that is tied to an "index" (in this case the Prime Rate, currently 3.25%) that may go up or down with the market. It is comprised of the index plus a specified rate called a "margin".
Whenever the index changes, the overall APR is similarly affected -- except when a minimum (a.k.a. "floor") or maximum ("ceiling") applies. Generally, maximums benefit the customer; minimums, the credit card company.
A "non-variable" APR is not tied to an index, and thus will not change when the index does. There is no minimum or maximum, since it is a static rate.
There are two types of rate changes in the notice. The first is where the sum of the index and the margin are less than the minimum, and hence that minimum is applied.
The second is when the sum of the index and margin is equal or greater than the minimum -- in which case the sum applies, not the minimum.
Take the first case, which applies to everyone who got this notice. These APRs are already at the minimum, so they cannot go any lower, no matter what the Prime Rate does. However, if Prime were to go up enough, the minimum could be exceeded, in which case the APR would also go up.
According to this notice, these were converted to a non-variable rate equal to the minimum. Thus the current rate has not changed; it remains exactly the same as the lowest it could have gone as a variable rate. But if prime goes up, the new rate will not, as it might have before. Advantage definitely to the consumer.
In the second case, which may or may not apply, the variable rate stays the same -- except that there is no longer a minimum. That means that the rate can now potentially go lower than it could before... again, advantage consumer. (Of course, Prime is close to as low as it can possibly go, so the chances of this happening are unlikely. But at the very least, there is zero disadvantage to the consumer.)
By the way, the elimination of floors was not mandated by the Fed until the last set of revisions to the regs... which only came out in January. So the "late" date of the notice is probably due to a lack of lead time. I'm guessing they can get away with that here only because none of the changes have a negative impact to the consumer.
===========================================
Mathew, thanks for the explanation. I made no assessment as to the value of the disclosure or its results; only its understandability by the average person. I got it the message the first time, primarily because I also author a monthly newsletter (going on ten years) covering compliance and financial issues within the mortgage industry. However, I should warn the readers that this disclosure was from Chase and that other card issuers have often used an index other than the Prime Rate. (which is currently 3.25%) I have reason to believe that the prime rate will increase in the not so distant future due to an increase in the Federal Funds Target Rate which is currently between 0 and 25-basis points. Thanks again for reading my blog entry and commenting -- steve
Posted by: Matthew | March 05, 2010 at 03:08 PM