Unlike most people, Seal Beach resident Tom Hazelleaf took the time to read the contract when he recently received a new MasterCard.
The card, issued by Capital One, includes the benefit of being compensated “for losses you incur as a result of identity fraud,” which the agreement declares clearly and seemingly definitively.
But if you keep reading, you come to a lengthy series of exceptions that will not be covered. These include “indirect or direct damages or losses of any nature.”
Waitaminnit. Losses you incur are covered, but not losses of any nature?
“It seems to me they’re saying that if they don’t want to pay you, they don’t have to,” Hazelleaf said. “That seems to make their identity fraud reimbursement basically useless.”
This latest adventure in fine print comes as the Trump administration systematically rips apart the Consumer Financial Protection Bureau, making it a watchdog in name only.
The bureau is charged with managing the Credit Card Accountability Responsibility and Disclosure Act, a.k.a. the Card Act, signed into law by former President Obama in 2009. The purpose of the Card Act is to “establish fair and transparent practices relating to the extension of credit.”
Needless to say, the approach to credit card issuers under Trump is markedly different than it was under Obama.
When the CFPB issued its first report on the effects of the Card Act in 2013, it credited the law with creating “a market in which shopping for a credit card and comparing costs is far more straightforward than it was prior to enactment of the act.”
However, the agency still found a number of areas of concern requiring further scrutiny, including add-on products such as identity-theft protection, which CFPB said are “frequently sold in a manner that harms consumers.”
A second report in 2015 reiterated concerns over practices “that still create risks to consumers.”
The latest report — the first under Trump’s watch — was released in December. It has no concerns about the credit card market.
Rather, it says “the market shows significant innovation” and, overall, there’s “a positive picture for consumers in the credit card market.”
Yes, kids: Banks are your friends!
This is, of course, foolish. While the Card Act has helped make the market for plastic more transparent, I can’t imagine any consumer thinking there’s no need for vigilance.
“The problems from the earlier reports did not disappear overnight from the marketplace,” said Linda Sherry, a spokeswoman for the advocacy group Consumer Action. “This latest report is just willfully ignoring them.”
A CFPB spokesman said the December report was just as thorough as past efforts. “The contents of the report should not be used to infer a lack of concern regarding any unlawful conduct the bureau is authorized to address,” he said.
Be that as it may, things are different.
Since Mick Mulvaney, who also serves as White House budget director, took over in November as interim chief, the order of the day has been to scale back regulatory oversight and enforcement as much as possible.
Under Obama, the CFPB’s top goal was to “prevent financial harm to consumers while promoting good practices that benefit them.”
Mulvaney rewrote that mission statement. The CFPB’s main goal now is to “ensure that all consumers have access to markets for consumer financial products and services.”
The White House also has called for slashing the bureau’s budget by 23% and eliminating rules “that unduly burden the financial industry.”
Not that banks are having a hard time making piles of money.
According to the Federal Deposit Insurance Corp., the U.S. banking industry would have pocketed a record $183.1 billion in profit last year if it wasn’t for one-time charges related to the Republicans’ tax bill. As it stands, banks had to make do with profit of $164.8 billion.
Meanwhile, total household debt is at a record $13.15 trillion, according to the Federal Reserve. Consumers were carrying a total of $834 billion in credit card balances as of the end of last year.
The latest CFPB report notes that “consumer credit card debt now exceeds its pre-recession peak,” but it has nothing to say on potential hazards to borrowers, such as harm to credit scores through delinquencies and defaults.
An air of detached blandness permeates the more than 350-page document, as if a government entity called the Consumer Financial Protection Bureau can’t be bothered to interpret credit card data from a perspective of safeguarding consumers’ best interests.
As for that amazing credit card that both reimburses and doesn’t reimburse for identity-theft losses, it took Capital One a few days to come up with an explanation.
Amanda Landers, a spokeswoman, said that when the card agreement says people won’t be reimbursed for “indirect or direct damages or losses of any nature,” what it means is that you won’t be compensated for “certain types of legal damages that may be awarded in civil actions.”
Then why doesn’t it say that?
Landers said I’d need to take that up with MasterCard.
Sarah Ely, a MasterCard spokeswoman, told me “the policy does not include payment for damages, direct or indirect, that may be awarded as a result of any lawsuit.”
But, again, that’s not what it says.
What it says is that cardholders won’t be repaid for “indirect or direct damages or losses of any nature.” There’s no mention of lawsuits.
If anything, the ambiguous language creates a huge loophole that, theoretically, would allow MasterCard or Cap One to ignore any losses it pleases — which is exactly what worried Hazelleaf.
Moreover, what kind of damages are we talking about?
Ely said cardholders may be covered for “attorney fees or court costs associated with civil suits brought against the cardholder as a result of identity fraud,” even though the contract says there’s no coverage for “an act of fraud, deceit, collusion, dishonesty or criminal act by you or any person acting in concert with you.”
That suggests coverage only in cases of mistaken identity, in which the fraud victim is left holding the bag for the I.D. thief’s mess.
However, it’s hard to imagine any court making a cardholder financially accountable in such circumstances, so I’m still scratching my head over what sort of “damages” MasterCard is worried about. If they mean legal defense costs, they should say legal defense costs.
Ely finally thanked me for bringing this to the company’s attention. She said MasterCard is “actively working to clarify the terms in future iterations of the original cardholder details you referenced to help alleviate confusion.”
A small thing perhaps, but with potentially large ramifications.
Under other circumstances, this might have been the sort of thing the CFPB could have straightened out.
But it sees no reason to worry.