Hooray for the State of Hawaii for protecting its residents from the questionable credit card marketing practices of the Too-Big-To-Behave banks.
Hawaii Attorney General David Louie has filed suits against Bank of America, Barclays, Capital One, JPMorgan Chase, Citigroup, Discover Financial Services and HSBC over unfair and deceptive marketing of a variety of ancillary products, including payment protection plans (see story).
Just two days ago, I received a call from Bank of America soliciting me for its payment protection program. So I can vouch for the deception that characterizes this sales effort. Particularly vexing is the requirement that cardholders sign up for the service before receiving materials describing the program.
Without revealing the fact that I worked in the financial services industry, I objected to this cart-before-the-horse marketing approach. The telemarketer insisted that no materials could be sent to me without my authorization to start a 30-day "free trial" of the service.
This action would put the onus on me to cancel the service before the end of the "free trial" to avoid being charged.
Presumably, that would be some time after I received the materials. However, the telemarketer made no commitment as to how quickly those materials might arrive. Admittedly, I did not press him for a timetable, since I was too disgusted with the whole approach to want to continue the conversation.
One of the few bits of good news to come out of the financial crisis has been the ability of state attorneys general to once more take action against big banks, as in the $25 billion mortgage servicing settlement.
In the past, big banks could count on the Office of the Comptroller of the Currency to shield their nefarious marketing practices from state consumer protection laws by asserting its right of preemption granted in the Civil War-era National Banking Act.
It is important to remember that this is the same preemption provision that the OCC invoked frequently in 2005 and 2006 to quash investigations by state attorneys general of shoddy lending practices at big banks.
Had these investigations been allowed to proceed, it is likely that the smoldering subprime mortgage problem could have been stopped long before securitization of ill-conceived loans exploded into a global economic disaster and required the bailouts of the very banks that caused the problem.
Sadly, these are the same big banks that Hawaii's attorney general has now identified as attempting to victimize its residents again.
Perhaps with the states' top cops back on the beat, now with reinforcements from the new Consumer Financial Protection Bureau in Washington, consumers will have a fighting chance at getting a fair deal from the banks with which they deal.
Jim Wells is president of Wellspring Consulting International, which focuses on expanding access to financial services for consumers underserved by traditional depository institutions.
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