Credit Card Companies Find a New Trick

Leave it to the credit card companies to get creative. New rules by the Federal Reserve Board go into effect next month, on the heels of the Credit Card Accountability Responsibility and Disclosure Act of 2009. These limit some abusive, and lucrative, practices at banks and other issuers of credit cards

Of course, that hasn’t stopped some in the industry from finding new ways to skirt the rules. Alliance Data Systems has Private Label Service and Private Label Credit segments that provide card processing and billing for private label retailers, and retail credit card financing and securitization. Both segments have seen revenue decline this year due to lower servicing revenue and higher credit losses.

Faced with the challenge, Alliance Data Systems has decided to charge its own customers a dollar a month for the audacity of receiving their statements by mail. Of course, this will disproportionally impact elderly and poor customers less likely to use the Internet. Labeled a statement fee, it skirts the law, which forbids separate fees when paying by mail, electronic transfer, or telephone.

Aside from the unfairness of the fees, customers paying these fees don’t receive any economic benefit. In fact, it penalizes the customer. Good old market competition will eliminate it soon enough (remember annual fees?). If not, government will step in.

In the meantime, read the Alliance Data System financials carefully next time quarterly earnings are reported. The income gain may be as tenuous as the fees being charged.