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American Banker

September 25, 2008

AFFIL appeared in this article by Maria Aspan on September 25, 2008:

A day after the House passed a bill to rein in many common credit card billing practices, consumer advocates tried to stoke public outrage about another aspect of the business: sales tactics.

Americans for Fairness in Lending held a conference call Wednesday with two former customer service representatives of MBNA Corp., which is now part of Bank of America Corp. Jim Campen, the Boston advocacy group’s executive director, opened the call by saying, “There seem to be realistic prospects for meaningful regulatory and legislative action this year that will eliminate some of the worst abuses” by credit card companies.

He referred to the House bill, sponsored by Rep. Carolyn Maloney, D-N.Y, as well as similar rules proposed by the Federal Reserve Board. The Senate is not expected to vote on the legislation this year.

Cate Colombo and Jerry Young left MBNA before B of A bought the Wilimington, Del., issuer in 2006. At MBNA, Ms. Colombo said, she was encouraged to “sell money” to customers by encouraging them to take out their maximum available credit in cash advances. Mr. Young said he had been encouraged to persuade callers to accept balance transfers and other services. “I was to reposition, restate an offer three times, before I took the ‘no’ as a definitive answer,” he said. “I felt that was wrong.”

Mr. Young said he decided to leave the company after being “hassled” for not being aggressive enough. Ms. Colombo said she “became increasingly disturbed by the practices” and was “very vocal” about her objections, which led to her being “let go.”

(Watch a video of Ms. Colombo and Mr. Young talking about what they say were abusive practices.)

Betty Riess, a spokeswoman for B of A, said the former MBNA employees’ “comments do not reflect our practices. Bank of America has nothing to gain by extending credit to people who do not have the ability to pay us back. It’s our practice to offer balance transfers and cash advances only to customers who have good standing and have a good payment history.”

Travis Plunkett, the legislative director of the Consumer Federation of America, said on the call that the marketing practices described by Ms. Colombo and Mr. Young, though not directly under regulatory or legislative scrutiny, had contributed to policymakers’ rising concern “about the underlying business model” of credit card issuers. “The sales tactics themselves wouldn’t be directly addressed” by the proposed reforms, he said. “Much of the financial incentive behind the tactics … would be addressed.”

Issuers’ “business model makes it fairly easy for most Americans to get access to credit with few up-front barriers anymore … but also fairly easy to trip one of those tripwires,” he said. The result is “a selling environment where abuses are more likely to occur.”

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