Investor Coalition Challenges Sustainability of Predatory Credit Card Practices at Bank of America, Citigroup and JPMorgan Chase
Market Wire, April, 2009
MMA Praxis Mutual Funds and the Interfaith
Center on Corporate Responsibility (ICCR) announced today that shareholder
resolutions addressing predatory credit card practices will appear on the
ballots of the nation’s three largest credit card companies. These harmful
practices, shareholders say, helped build up nearly $1 trillion in
high-cost, unsecured debt that is burdening consumers and undermining
critical financial institutions at the heart of the current economic
downturn. Concerned investors are also in active discussions with American
Express, Discover Card, Capital One and Wells Fargo on similar issues.
“Citigroup, JPMorgan Chase, and Bank of America drive more than 60% of the
credit card business in the United States. Their past practices,
intentional or not, played a significant role in shaping the over-leveraged
consumer lending environment we have today. We are calling on these
important companies to do more than make incremental improvements in their
practices. Our economy — and the banks themselves — need new models for
consumer lending that strengthen borrowers, rather than weaken them,” said
Mark Regier, Stewardship Investing Services Manager for MMA Praxis and lead
filer for the resolution at JPMorgan Chase.
The resolution seeks the creation of a report to shareholders reviewing
company practices related to credit card marketing, lending and collections
with particular attention to those that can be considered predatory or
abusive. These tactics include universal default policies, bait-and-switch
marketing tactics, hidden fees, and intentionally complicated cardholder
agreements. While some approaches have been abandoned under increased
public and regulatory scrutiny, shareholders are concerned that little
attention has been focused on the human and economic impact of past
practices and the need for more sustainable and transparent approaches.
With default rates at historic highs, the banks have a fresh appreciation
for risks involved in this type of lending. “What we have yet to see,
however, are models that incentivize both prudent lending and responsible
borrowing,” says Sr. Nora Nash, Director of Corporate Responsibility for
the Sisters of St. Francis, and lead filer for the resolution at Citigroup.
“Despite cardholder efforts to ‘live by the rules,’ evidence suggests that
card providers continue to change the rules and manipulate the system in
ways that leave consumers in an increasingly vulnerable position.”
Industry practices have helped bring credit card debt to around $10,000 per
household and have placed a heavy and frightening burden on the American
consumer. “Over two-thirds of the American economy is dependent on consumer
spending,” says Adam Kanzer, managing director and general counsel at
Domini Social Investments and lead filer for the resolution at Bank of
America. “At the same time, US consumers are struggling under a mountain of
high-cost credit card debt. This is a dangerous combination
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