Who doesn’t know Suze Orman? I’m sure you’ve flipped by her show on Saturday nights on CNBC. In case you are wondering, Orman is going to talk about credit card company rules this week.
With her brightly colored jackets and even brighter teeth, Orman is a media celeb. Her game is audience, just like every media play (BankInnovation.net included). You may not realize this, but the Federal Deposit Insurance Corp. is helping Orman gain an even wider audience, and I wonder whether, in these austere times, if the FDIC should be doing so without compensation.
Let me explain. Orman is the spokeswoman for the FDIC’s MyFDICInsurance.gov consumer education initiative. Since last fall she’s been the “face” of the campaign, appearing on the site and in TV ads promoting the FDIC as a safe steward of deposits.
I sent in a Freedom of Information Act request to the FDIC to find out about the relationship between Suze Orman and the agency and found that the FDIC pays her nothing for being its spokeswoman. In fact, there is not even a contract between Orman and the FDIC. Apparently, Orman and the FDIC have a handshake deal.
While this handshake deal is intriguing enough (why the government would not require a contract is odd; more on this later), it raises some additional questions. Why would Suze do this? Wouldn’t she at least want some trademark protections or other rules surrounding her role in the FDIC’s campaign?
To me the answer is obvious: it’s a sweet deal. FDIC touts Orman as the “money expert” at no cost to her. In fact, she gets an explicit endorsement of her expertise by the federal government. At no cost to her.
Of course, there are countless examples of government charging enterprises for promotional services. I was recently driving on the Mass Turnpike and noticed that Citizens Bank has its name and logo prominently displayed at each toll booth on the highway. Citizens pays for this nice branding. Yet, Orman pays nothing for being promoted by none other than the FDIC.
Is there evidence that she has benefitted? Indeed there might be. See the chart below, which shows how the traffic to Orman’s website has doubled this year. Is that traffic increase related to Orman’s role as the FDIC cheerleader? Probably. It certainly hasn’t hurt.
CNBC, which broadcasts Orman’s weekly show, pays to promote her program. Why should the FDIC not ask Orman to pay for the eyeballs it is giving her? It’s not like the FDIC can’t use the money.
As I thought about this whole deal between FDIC and Orman, I realized that while Orman is effectively taking the FDIC for a ride, it is more disconcerting how the FDIC has fallen for it. There is no evidence that the FDIC even tried to bid this out to others or get paid for the exposure it is giving, and this echoes a more general shortcoming of the FDIC: ignorance. The FDIC obviously exhibited profound ignorance during the run-up to the credit crisis, and now shows how it fails to exhibit a degree of shrewdness in dealing with Orman. As a taxpayer, I am dismayed – but not shocked.
While Orman is good, Dave Ramsey is better. No matter – since no one can trust the government for anything to do with finance at least one regulator (FDIC) has a voice that may help to bring reason to the public and to Congress on the issuance and use of credit cards. In December, the Fed issued a few rules to stop some abusive practices in the industry (they finally admitted it was too widespread). It was a start to reverse decades of neglect. However, it does not appear that the regulators have done anything regarding “Safety & Soundness” in the actual lending practices. Of course, based on the current situation, it does not appear that the regulators have a handle on what “safe and sound” may be other than they have been persuaded to allow card issuers to keep their algorithms in the ” company safe” away from supervisory eyes and the regulators have responded to the “sound” of industry associations singing how prudent they were.
Additionally, none of the major card issuers have defined “predatory credit card lending”. Perhaps because it will be too humiliating to publicly acknowledge how far they have transgressed to becoming bad economic actors.
I hope Orman tells it like it is – many cardholders are being abused. But where can they go? Only about 8 companies control most of the market and it is drifting to oligopoly. I hope that she starts by telling them to call the president of the card issuers and demand a return to concern for the customer. How can banks justify 29% interest rates to any customer and expect anyone to return to financial health. Is this “suitable” financial advice? Actually how can they even justify 21%?