Published: April 2009

Shareholders target predatory credit card practices

Consumer Action and the Center for Responsible Lending joined socially responsible MMA Praxis Mutual Funds and the Interfaith Center on Corporate Responsibility to discuss anti-consumer credit card practices that could have a negative impact on shareholders of major card issuers, and the larger economy.

Consumer Action and the Center for Responsible Lending joined MMA Praxis Mutual Funds and the Interfaith Center on Corporate Responsibility for a media conference call focused on the economic dangers of predatory credit card practices on April 16.

Shareholder resolutions addressing predatory credit card practices will appear on the ballots of the nation’s three largest credit card companies (JP Morgan Chase, Bank of America and Citigroup). Shareholders say these harmful practices helped create nearly $1 trillion in high-cost, unsecured debt that is burdening consumers and undermining critical financial institutions at the center of the current economic downturn.

Click here to hear a podcast of the news conference.

Linda Sherry, Consumer Action's Director of National Priorities, spoke about the impact predatory practices have on low- to moderate-income communities and how this weakens the fabric of America’s consumer economy. (Click here for a PDF copy of Sherry's remarks.)

Josh Franks, Ph.D., Senior Researcher, Center for Responsible Lending addressed the range of abusive credit card practices currently employed today and the shortfalls in current regulation of this industry. Franks, an economist, noted, "The top credit card companies for the last 20 years have found a formula to short-term profit. The formula relied on driving up debt, and appearing low priced while actually charging high prices."

Laura Berry, Executive Director at the Interfaith Center on Corporate Responsibility highlighted the important role of shareholder advocacy, particularly among religious institutions, in addressing pressing issues of social and financial concern.

"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," said Mark Regier, Stewardship Investing Services Manager for MMA Praxis and lead filer for the resolution at JPMorgan Chase. "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."

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.

"Identifying and addressing the social and economic implications of short-sighted business practices is not something new for our organization," said Berry. "For over a decade ICCR members have warned of the gathering storm in consumer credit. Since 2004, our institutional investor members have participated in 166 corporate engagements at over 100 companies. By adopting clear new standards, financial services companies can demonstrate a true commitment to their current and future customers."

"As religious and socially-concerned investors, we are driven to be engaged in this issue which has a negative impact on vulnerable communities, places shareholder assets at risk, and is hindering the prospects for our nation's economic recovery," said Regier. "For more than 10 years, the costs of living have increased sharply, while savings and real wages were stagnant. High-cost credit card debt has filled this gap. Short-term profits and the promise of 'easy credit' eclipsed responsible lending practices and the need for increased financial literacy. This simply cannot continue."

Lead Organization

MMA Praxis Mutual Funds

Other Organizations

Center for Responsible Lending | Interfaith Center on Corporate Responsibility

More Information

Mennonite Mutual Aid (MMA)

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