Louis Proyect: The Unrepentant Marxist

September 26, 2008

Chase Manhattan Late Fee

Filed under: capitalist pig,crime,economics — louisproyect @ 8:28 pm

One of the things I inherited from my father is fiscal responsibility. I pride myself, just as he did, on paying my bills on time and not going into debt unless it is absolutely necessary. The biggest debt I ever accrued in my life was for college tuition and it was paid off promptly.

Back in 7th grade, we were taught how to balance a checking account and the lessons have stuck with me. Every time either I or my wife uses our ATM cards, we put the charge slip into a little basket on my desk and when I get a chance I enter a batch of them into MS Money. And when I get my Chase banking statement each month, I reconcile the Chase transactions against what I entered in MS Money in the same way that I learned in the 7th grade.

I also use Chase Online to pay my bills. Since more and more credit cards impose stiff penalties if you are even a day late, I make sure to check the time it takes for a payment to register. Some accounts take a day or two, but most are flagged as “same day”. So when I last paid my Chase Visa bill on September 2nd, the same day it was due, I assumed that there would not be a penalty.

So given my anal retentiveness around these questions and my hatred for banking institutions, you can imagine my consternation when I discovered that I incurred a $29 late fee. I called Chase and discovered that according to their records, my payment was received on September 3rd, not the 2nd. After insisting emphatically that their records were wrong, I finally discovered how I was snookered into a late charge following the logic of Kafka novel.

The Chase help desk operator directed me to the reverse side of the statement which has “Information About Your Account”. In the second paragraph (“Crediting of Payments”), it states that “Payments made electronically through our automated telephone service, Customer Service advisors, or our website will be subjected to any processing times disclosed for those payments.” He then added that the processing time for payments made through Chase Online usually take 2 to 3 business days even though the system tells you that it is same day. I asked where the information about 2 to 3 business days can be found since it was certainly not within “Information About Your Account”. He replied that it was on the Agreement I received after signing up for a Visa Card. I laughed bitterly when I heard this, since my Visa Card is at least 20 years old and asked him who the hell would hold on to a 20 year old Agreement form? He assured me that he would be happy to mail me one.

Does this sound like Chase is trying to rip people off? Perish the thought but it appears that big banks are relying more and more on this line of business in the face of declining profits.

The Harper’s Magazine Index for October 2008 reports:

Percentage of Citigroup profits in 2006 that came from credit cards: 18

Percentage last year: 79

That’s a huge increase. Although Harper’s does not analyze the statistics, it seems pretty obvious that traditional profit sources have dried up, most especially home mortgages one must assume.

The Naderite Public Research Interest Group reported:

SKYROCKETING LATE FEES: The survey found average late fees of $27.61. Credit card companies are reaping more profit than ever before from late fee income, for three reasons: (1) the average late fee has more than doubled in ten years, (2) companies have decreased the amount of time between when they mail a bill and when payment is due; and (3) nearly two-thirds of companies have eliminated leniency periods, and have begun to impose late fees immediately.

“Credit card marketing has become reckless and deceptive, and sometimes violates consumer protection laws,” said Mierzwinski. “These deceptive tactics are used by some of the country’s largest card issuers and affect millions of consumers each year.”

Some of the largest credit card companies have recently paid major settlements and penalties in lawsuits by consumers and civil actions by the government, for amounts ranging from $7-105 million. Alleged practices include purposely posting monthly payments late in order to increase cardholders’ APRs and to gain more late fee income. For example, Providian was found by the federal Office of the Comptroller of the Currency and the San Francisco District Attorney to have violated the Federal Trade Commission Act, which prohibits unfair and deceptive practices, when it said a card had no annual fees, even though mandatory monthly fees on the card totaled $156/year. The bank agreed to settle the charges and had to pay consumer restitution of $300 million.

I guess I shouldn’t have expected anything that much different from a bank founded by John D. Rockefeller Jr., the architect of the Ludlow Massacre. On April 20, 1914, when he sat on the board of the Colorado Fuel and Iron company (his father owned a majority of the shares), the Colorado National Guard opened fire on a tent colony of 1,200 striking coal miners. 20 people, 11 of them children, died during the attack.

Killing strikers or extorting late fees from poor schmucks like me boils down in the final analysis to the imperatives of profit-making. When you put the almighty dollar on the altar, all sorts of devilish behavior ensues. Maybe the mammoth disgust with financial institutions boiling up over the 700 billion dollar bailout will finally put these bloodsuckers on the defensive. There must be millions of other people who feel like their bank has “mugged” them, as I put it to the poor soul making a living at the Chase help desk who had to suffer the wrath of Louis Proyect.

UPDATE

Posted to PEN-L and Marxism mailing list by economist Michael Perelman:

In The Confiscation of Economic Prosperity, I have a short section on fees (and other costs borne almost exclusively by the poor), because such costs do not count when the government measures real income. I think it is an important subject. A former student who works for the BLS tried to interest people there in the question, but without success.

In addition, the reported income of the poorer segments of society does not account for the many extra expenses that poor people pay. For example, the data ignores the late fees that banks and other corporations charge. In 2004, banks, thrifts, and credit unions collected a record $37.8 billion in service charges on accounts, more than double what they received in 1994, according to the Federal Deposit Insurance Corporation and the National Credit Union Administration. Banks continue to raise fees for late payments, low balances, and over-the-limit charges to as much as $39 per violation. Some banks even charge for speaking with a service representative. Naturally, these fees predominately fall on the poor (Chu 2005; Foust 2005).

Insurance companies charge more for people in poor neighborhoods. The poor also find themselves at the mercy of predatory lenders. To make matters even worse, their food costs more because they lack convenient access to grocery stores. Even though the government disregards these factors in assembling its statistics about wealth and income, they can be significant (Brookings Institution 2006).

14 Comments »

  1. Bullets vs Late-fees…
    Propaganda vs the nightly news
    Profit vs wages
    The big ones they get away with—just not quite as often
    The little ones are their cream

    I’d cancel the card and go to some other bank… at least inject some cost into their transaction profit scheme!

    Comment by HoracioO — September 26, 2008 @ 11:15 pm

  2. Hey, Louis, by Canadian standards you got off light. If your payment to the credit card issuer here is a minute over the due date, you are docked the entire amount on the interest for the past month, and if you don’t pay that immediately but wait until your next monthly payment is due, they add interest on the interest for the following month. (At close to 20% per annum compounded monthly, as well.)

    I agree, in the last year or so the credit card issuers seem to have turned to fees as a major source of revenue to replace other extortions — although in Canada, the five big banks dominating the financial landscape largely avoided the subprime mess and housing prices and mortgages have so far held up. Twice in the last year, I have been docked for late payment interest although, like you, I pay on time (I think all ex-Trotskyists are somewhat anally retentive, but let’s not blame our dads). In one case, I forgot that the “due date” on the statement was on a non-business day (even though cheques are electronically processed 7/24 around the clock); in the other, the bank claimed the post-dated cheque, sent two weeks before, never arrived. (I now pay on-line.) And when I complained, the poor guy responding for the bank (judging from his accent, he was in India, and it was the middle of the night there) said I was allowed two complaints every two years, so I had better not complain again for two years. (He did forgive the interest, however. I did not subject him to the Fidler wrath.)

    Richard

    Comment by Richard Fidler — September 27, 2008 @ 12:08 am

  3. This is why we need Ralph Nader in the White House.

    Comment by Doug — September 27, 2008 @ 2:02 am

  4. Insightful article. Indeed, many other banks do this all too regularly.

    But you should send the CEO of JPMorgan Chase and other executives, including the head of its consumer finance and personal credit card divisions, a copy of this article.

    Financial institutions have been “targeting” the poor, the low income households, the elderly, and the youth, and the national minorities, particularly African Americans, in various ways, including sub-prime and alt-A loans and other schemes.

    Comment by Abu Spinoza — September 27, 2008 @ 9:16 pm

  5. I’ve never owned a credit card. I can also confidently say that i never will. Mind you they can be convenient if you want to shop online, but then there is the privacy question, with companies tracking what you buy.

    There was an interesting documentary on the history of the credit card on pbs’s frontline some years’ back. I think Ben Stein (ed. no one seems to have wanted to change his intro in wikipedia“Benjamin Jeremy Stein (born November 25, 1944) is a filthy money-thirsty kike.”. Just awful)appeared in it telling how he always pays his card off on time so as to never incur interest.

    Comment by atlas — September 29, 2008 @ 7:36 am

  6. I think you should check your next statement to make sure they haven’t raised the interest rate on you as part of the penalty for a single late payment. A friend of mine was as fastidious as you, but for a single late payment, perhaps through the fault of the USPS, ended up not only paying the late fee, but also discovered his APR had increased from around 10 % to a stupendous 28 %, which was to have been applied to his carried balances from then on. Fortunately, he was able to get a bank loan at 10% to pay off his balance in full before incurring these loan shark rates. Actually, I think this is a standard practice of the CC banks, and if you’ve escaped, I will be very surprised.

    Comment by Yusef — September 30, 2008 @ 2:35 am

  7. I’d like to hear Atlas’ experience of life without a credit card. Hotel desk clerks look at me as if I’m a con man. Waiters size me up as a no-tipper. Stores are wary when I pay in cash as if I’m passing counterfeit money. When I want to buy a book on the Internet I have to beg a friend with a credit card to do it. The life of a pariah.

    Comment by Peter Byrne — October 3, 2008 @ 12:00 pm

  8. I encourage ANYONE with a Chase account to reconsider that relationship. It’s clear that Chase is desperate, and resorting to predatory credit card lending practices. I’ve had a Chase acct. since ’06, with a due-date of 14-16 each month. Chase CHANGED MY DUE DATE TO THE 9TH.

    Since my statement arrived at the same time, and I pay my bills on time every month, I had no reason to expect the due-date for this account to change. When I saw a late fee on my account, I called to find out why.

    Despite the fact that I had a mid-month due date for YEARS, Chase said they can change my contract terms at any time. They claim “notified” me of the change when my statement arrived. The claims representative snidley commented, “You do read your statement, don’t you?”

    For the record: I’m a AAA+ customer. I have a 760 credit rating, own a home, and haven’t been late on anything to anyone for 20+ years. Chase upped my due date by a week, and then accused me of being “late” (by one day)? I’ve incurred late fees, AND my interest went from 0.99% to 22%. I’m confident it is because I have a 15K a balance at .99%, my account was “chosen” for a new due date. They offered no reason, no criteria for why I was “selected” for a new due date. Only that my previous interest rate was no longer available. There is NO co-incidence here.

    The answer is NOT to give Chase electronic access to my checking account – Do these guys seem like someone who should have electronic access to YOUR bank account?

    I’ll be writing to all state and federal authorities, and contacting others with similar experiences. Please contact me directly at vthearne@yahoo.com.

    Comment by Vickie Hearne — December 6, 2008 @ 7:58 pm

  9. A recent lawsuit against Chase for their credit card usury:

    http://www.msnbc.msn.com/id/30111663/

    Comment by Karl Friedrich — April 10, 2009 @ 2:43 pm

  10. The only real moron is some sleepless shill trolling from Chase’s legal dept who gets all bunched up over criticism of cowardly otherwise incompetent bank execs who manage quite competently at systematic usuary & the wholesale ripping off of consumers and then getting rewarded with criminally inspired stringless bailouts & monstrous compensation packages from whichever buddy’s sleeping in the white house.

    Like Voltaire might have said were he alive today: “There can be no justice on the continent until the last commercial politician is strangled with the guts of the last banker.”

    Comment by Karl Friedrich — June 6, 2009 @ 4:51 pm

  11. I was one day late 2 months ago. Chase charged me $39.00. I called them and they will not remove it. I mentioned to them that there is going to be a new law which will keep them from doing this. They acknowledged this will be the case in the year (whatever). But I talked to an agent and a supervisor and they refused to remove the late fee. One day late and I always pay 3 times the amount owed. They get good interest from me too. The congress did not do enough to keep the credit cards decent. There must be some reason or law that keeps other more decent companies from opening a credit card company that is customer friendly and charges less interest. But I smell a rat here. I think there must be some reason that a new card company charging less interest is opening a new credit card company.

    Comment by Dan — October 1, 2009 @ 10:33 pm

  12. CHASE is surely eager to find out how this works out for their fellow crooks at BOA & Citi:

    Got Perfect Credit? You Could Be Charged For It!
    http://wcbstv.com/consumer/credit.card.fees.2.1272124.html

    Comment by Karl Friedrich — November 9, 2009 @ 11:08 pm

  13. Electronic payments are not suject to gov’t laws. If you put it in the mail the post mark is the date received. It’s just another way to make money.

    Comment by Ron — July 8, 2010 @ 10:26 pm


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