Report Criticizes Credit Industry Over Excessive Consumer Debt
Aggressive marketing by the credit card industry has left millions of Americans saddled with excessive debt this holiday shopping season, a consumer group said Tuesday.
The Consumer Federation of America also singled out in its report the banks it believes are the most irresponsible in extending credit. A banking industry group disputed the conclusions, saying the expansion of credit card marketing has enabled people with lower incomes to get credit.
“Millions of households carry far too much high-cost credit card debt,” Stephen Brobeck, the Consumer Federation’s executive director, told a Washington news conference. He added, however, that both banks and consumers must act to resolve the problem and that consumers “must exercise more discipline.”
An estimated 55 million to 60 million American households with revolving credit card balances had an average of more than $7,000 of credit card debt, costing more than $1,000 a year in interest charges and fees, according to the report.
The consumer group said the least responsible banks--as measured by their charge-off rates for debts considered uncollectable--are Mellon (charge-off rate of 9% from June 30, 1996, to June 30, 1997), Hurley State (9%), Wells Fargo (8.6%), First Union (8.4%) and Advanta (8.2%).
Tish Signet, a spokeswoman for First Union, called the report “seriously flawed and misleading.”
“We stand by First Union’s ongoing commitment to extend appropriate credit to qualified individuals and to maintain high standards of credit quality,” she said.
Mellon spokesman Stephen Dishart said the survey “singles out a particularly small part of Mellon’s lending program.” Credit card loans account for only 4% of the bank’s overall lending, he noted.
Dishart and Signet did not dispute the charge-off rates cited by the report.
The American Bankers Assn. said in a statement that banks have expanded their credit card marketing “to give people at all income levels access to credit. It is important to note that while those credit card customers have a variety of credit histories, more than 96% of all accounts are paid on time.”
Wells Fargo spokeswoman Kim Kellogg said that the bank’s losses cited in the report stemmed from a 1994-95 marketing campaign, and that the mail solicitations used then were sent to many more consumers than currently.
Spokesmen for the other two card issuers didn’t immediately return calls seeking comment.
The most responsible banks, according to the consumer group, are MBNA (charge-off rate of 2.1%), Peoples (2.4%), Travelers (2.7%) and First USA (2.9%).
