Month: July 2018

Huffington Post | May 2005 |A One-Way Deal with MBNA

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by Sen. Elizabeth Warren
Make your payments on time and what happens? Maybe you do OK and maybe you end up with a huge rate hike.

Remember how former FBI Director Louis Freeh testified before the Senate last week that his new boss, credit card giant MBNA, never jerked up interest rates just because a customer was in default on another loan? At that same hearing, testimony was offered about MBNA practices that suggested Mr. Freeh was not telling the truth. Since then, people have been emailing their stories about MBNA practices that flatly contradict Mr. Freeh.

But more MBNA practices keep emerging, practices that seem to converge on the same bottom line: the customer signed a contract that binds the customer, but MBNA can change the terms whenever it wants. Look at this one from Joe Soseville:

I had an experience with MBNA where the artificial intelligence (AI) that computes my credit score drove the interest rate on several of my MBNA accounts up more that 12% and 15%, respectively. On each account I had a stellar history and had established outstanding creditworthiness. Ironically, through industry acquisitions and mergers, MBNA had acquired these accounts and this resulted in my credit score’s AI showing that I had now become an “at risk customer” and MBNA automatically raised my interest rates.
So Joe pays on time, MBNA changes its computer programs, and Joe’s interest rate goes up by 12-15 percentage points. And Louis Freeh tells Congress what a great company he works for, a company that never does this sort of thing.

MBNA seems to think that a contract a one-way street—the customer must meet the terms but MBNA can change them whenever it wants. Great deal for MBNA—just not for the rest of us.

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Washington Post | March 2007 | ‘Maxed Out’: Serious Matters Of Life and Debt

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by Ann Homaday

“Maxed Out,” a film about the consumer debt crisis, might as well be ripped from the headlines, in light of last week’s stock market plunge (blamed in part on too many mortgages sold to high-risk home buyers). But here’s the man-bites-dog part: This factoid-filled, talking-heads documentary — by a business school graduate — turns out to be amusing. And enlightening. And positively riveting.

As unlikely as it sounds that someone has made a taut and entertaining film about credit, that’s precisely what James D. Scurlock has done with “Maxed Out,” in which he delivers a punchy, well-reasoned account of America’s huge problem with debt, how we got there and what the stakes are. (P.S., Scurlock is not the guy who took on the fast-food industry in “Super Size Me.” That was Morgan Spurlock.)
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“Maxed Out,” often uses grim humor to deliver the bad news: that banks routinely seek out the young, poor and chronically late-paying; that they’re in cahoots with other powerful forces in government and business (such as the burgeoning field of debt collection); and that no one — especially lawmakers whose biggest contributors come from the financial services industry — seems to care. Particularly galling in this respect is Julie Williams, the acting U.S. comptroller of the currency and chief bank regulator, who delivers Orwellian apologies for the industry she’s supposed to be overseeing, and Louis Freeh, former chief of the FBI and now a honcho at credit card giant MBNA (presumably, he makes sure there are state-of-the-art computers there, a luxury he didn’t bother to acquire for the bureau under his pre-9/11 watch).

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Huffington Post | May 2005 | Is Louis Freeh Telling the Truth?

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by Sen Elizabeth Warren

Did a former FBI director lie to Congress about his new boss’s questionable business schemes?

Say you took out a credit card with a fixed 6.9% interest rate, charged up some items and faithfully made your payments on time. One month you discover that the bill has jumped to 29.9%. You call the company to complain, only to discover that they have imposed a “universal default clause,” which means that because you were a day late on your water bill, your credit card interest rate has now quadrupled. Legal? Yes. Fair? No.

In a 2004 survey published in Card News, an industry newsletter, MBNA was first on the list of 20 major banks with universal default clauses. The info on MBNA comes through Phillips Business Information, Inc., which Lexis describes as more than 70 newsletter providing “the news and analysis that is critical to professionals in these industries.”

In addition, the Consumer Affairs website carries a story about all the consumer complaints against MBNA in connection with its universal default clauses.

So why did Louis Freeh, now Senior Vice-Chairman for MBNA, tell Senators at a Congressional Hearing on Tuesday that “MBNA does not practice universal default”?

Did the industry news get it wrong? Are MBNA’s customers making up rate hike stories? Has MBNA done a sudden, unannaounced about-face? Does Freeh not know how his business works? Or is Freeh unwilling to tell the truth about MBNA’s high-profit scam?

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