The Secret of History of the Credit Card
The Secret History of the Credit Card is an old Frontline documentary featuring Senator Elizabeth Warren when she was still a Harvard law professor and ex-New York governor Elliott Spitzer when he was still state attorney general. It traces the “secret” repeal (and circumvention) of state usury laws that allowed banks to charge as much as 30% on credit card loans. This, in turn, made credit card banks the most profitable companies in the US. In 2003, several of them earned higher profits than MacDonald’s or Microsoft.
In 1981, when Citibank made its infamous deal with South Dakota, high interest rates were causing a massive loss for credit card companies. Although they paid 12% on average to borrow funds from other banks, state usury laws capped the interest they could charge customers at 9%. In return for South Dakota’s pledge to repeal their usury laws, Citibank agreed to move their entire credit card operation to Sioux Falls South Dakota.
The documentary goes on to explore the various marketing ploys the credit card industry employs to con consumers into increasing the credit card debt on which they pay 18-30% interest.
In 2003, approximately 90 million US credit card customers were “revolvers” (paying 18-30% interest on monthly balances), and 51 million were “deadbeats” (the industry term for credit card users who get “free” credit by paying their full balance every month).
The filmmakers are also highly critical of the Office of the Comptroller of the Currency (OCC), the Treasury division charged with regulating banks. They provide several examples of attempts by the OCC to undermine the ability of state prosecutors to protect consumers against credit card companies’ flagrant lawbreaking.
In 2004 when this documentary was made, the Better Business Bureau received more complaints about credit card companies than any other industry.
For copyright reasons, the video can’t be embedded. It can be viewed free at http://topdocumentaryfilms.com/secret-history-of-the-credit-card/
Also see Credit Card Nation – a great book on the credit card rip-off.