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Monday, May 23, 2011

Premier Buncocard: the fleecing of America

 The press is the real culprit.  It sucks, and sucks, and sucks.  Literally. It perennially sucks the plutocracy, as Madville Times points out.  Often, its sucking function impedes articulation.  Nowhere has that been more apparent than in the announcement of Premier Bankcard that it is closing down its operation in Spearfish.  More than 300 people will be let go.  Overall, Premier is reducing its workforce from 3,000 to 1,600 jobs.  On the announcement of the closing of the Spearfish operation, the press dutifully quoted Premier CEO  Miles Beacom who said price and fee controls established in a new federal law cost the credit card company business. He said,  “Closure of our Spearfish facility is the direct result of our inability to price based on risk under the new (federal) regulations.”

He said further, "It took away our ability to price the card for the risk," Beacom said. "We've been testing a number of products that just have not performed."

 No one in the press or anyone else asked how Premier Bankcard prices according to risk and specifically how the new credit card regulations affected their ability to do so.  Or just what the new regulations did to limit their ability to operate.   To much of American business, any government regulations, especially those which put restraints upon criminal predations, are considered odious, burdensome, and job-killing.  In the mind of the corporate plutocracy, consumers are regarded merely as cows to be milked and bilked and  sheep to be fleeced.  The biggest and falsest myth about American business is the one about competition.  The idea is that successful business is one that produces a superior product with superior service and earns its place in the economy through merit and performance.  That is the line fed to the fools, the consumers, but the real art of business is to market shoddy, worthless  junk through false and deceptive advertising.  

While CEO Beacom of Premier Bankcard blames government restraints as the reason for Premier's inability to compete in the credit card market and its halving of its workforce, tells quite a different tale, as it includes the Premier Bankcard in its list of razzies, the worst cards on the market:     

First Premier Bank built its brand by offering unsecured MasterCard accounts to consumers with damaged credit profiles and low FICO scores. Fill out an application, and you'd get a card with a $300 credit limit. It just happened to be preloaded with up to $270 in processing, enrollment and service fees. Consumer advocates and lawmakers hated cards of this kind so much, they campaigned for new Federal Reserve rules that capped initial service fees at 25% of a card's credit limit.

CEO Miles Beacom openly complained that the restrictions hurt his company's ability to help Americans rebuild their credit. Claiming the need to mitigate risk, Beacom launched trial offers for a new First Premier MasterCard with an astonishing 79.99% APR. We are guessing the response hasn't been that strong, since the issuer reported laying off nearly a third of its employees during 2010.

Another aspect of the credit business is that with the coming of the Great Recession in 2008, consumers greatly reduced their use of  credit.  Some were thrown out of work and had no means to pay bills, let alone use credit.  Others saw that it was prudent to curtail their use of  credit.  Premier Bankcard gives no information on the role the recession played in what appear to be declining fortunes.  It, rather, blames the government for the performance of its shoddy, inferior product in the marketplace.  

The new credit card regulations do not in any way interfere with a card company's ability to offer and maintain a viable and profitable service product.  They do address some of the more outrageous practices over which consumers had no control and often no reason to expect was part of the credit arrangement they signed up for.  The new standards are summarized as follows: 
  •     Restricts all interest rate increases during the first year
  •     Restricts interest rate increases on existing balances
  •     Increases notice for rate increase on future purchases
  •     Preserves the ability to pay off on the old terms
  •     Requires fair application of payments
  •     Provides sensible due dates and time to pay
  •     Protects young consumers
  •     Restricts issuance fees on fee harvester cards
  •     Requires enhanced disclosures
  •     Places limits on fees and penalty interest 
  •     Requires banks to review rate increase every six months
  •     Establishes gift card protections 
When it comes to marketing cards, the new law requires that a company review a consumer's ability to pay back the debt before issuing a card:
‘‘A card issuer may not open any credit card account for any
consumer under an open end consumer credit plan, or increase
any credit limit applicable to such account, unless the card issuer
considers the ability of the consumer to make the required payments
under the terms of such account.’’
Given the logic of today's business models, it is probably impertinent to ask why a company would give a person credit when it determines the person has no ability to pay it back.  But the stated regulation still gives the company discretion in the matter.  

The most alarming aspect of the Premier Bankcard debacle is that people are willing to base their futures and their lives on an inferior, shoddy, and stupidly malign business practice.  A barber interviewed in Spearfish noted, "I know a lot of people that work out there and considered it a career for them; and now, that's over with unless they move and relocate."

I suppose that when an economy shifts from producing competitive goods and services and bases itself on the marketing of the inferior and shoddy through milking, bilking, and fleecing, the greatest expectation some can have in life is to be a milkmaid or a sheep-shearer, hoping to catch some of the offal of the business model.  Some even elevate Premier Bankcard to the status of a savior:  

The regulations that led to this layoff is another example of outright hatred of those less economically fortunate.
Have bad credit problems because you were laid off or had hours reduced and want a chance to rehabilitate your credit rating? Tough.
Need credit for an emergency? Tough
Don’t want to use Pay Day Lenders? Tough.
Can’t rent a car, buy a plane ticket, or rent a hotel because you don’t have a credit card? Tough.
You liberals might feel good about yourselves and your sanctimony but your actions are hateful to the poor.

A phenomena in popular culture has been the fascination of the public with films and television shows about Mafia families.  They get caught up in the drama of the family life, but seem oblivious to the way the Mafia families make their livings.  This and the press and public attitudes expressed toward Premier Bankcard may well indicate a vast moral shift in the politics and purpose of America.

To some, the fleecing of America has become a spiritual and patriotic cause.   


Amy Schwab said...

Well said. The press's depiction of these predators as victims of reasonable regulation is one of the saddest parts of the recession. I think it is very encouraging news that Premier is shrinking - and that people who were working for them and caught in their web are now able to move on to real business. Not unlike when a criminal-owned enterprise gets busted and the employees are out of work - until the next 'big thing' comes along.

Douglas said...

You may find this old post at Dakota Today interesting.

David Newquist said...


What is most preposterous is the contention of those people who say that a card with a $300 line of credit with only $30 left on it after the preloaded fees and rates are deducted is helping the poor by enabling them to establish a credit history. Your link provides a good specific example of the card works.

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