Is Your Credit Card Company Stalking You?

The question may sound ridiculous – unless the answer to “What’s in your wallet?” is a Capital One card.

Some of Capital One’s customers recently received a contract update, and at least one of them was concerned by what he read there. Rick Rofman, a resident of Van Nuys, Calif., spoke to the Los Angeles Times about his reaction to the contract that included provisions for contacting cardholders by “personal visit,” as well as the more traditional phone, fax, text or email. The visits can be at your place of employment or at your home.

“I guess most people don’t read the inserts, but I happen to have read it,” Rofman said. “I’m 71 years of age, and I have never seen this anywhere.”

Capital One (COF) also reserves the right to “spoof,” or mislead, caller identification services.

When journalists contacted the credit card company, it was quick to clarify that this language wasn’t new and that it didn’t mean cardholders should expect to find Capital One employees peering in their windows or lingering in workplace parking lots.

Company spokeswoman Pam Girardo told the LA Times, “Capital One does not visit our cardholders, nor do we send debt collectors to their homes or work,” except in cases of big-ticket sporting goods like jet skis. Girardo also said that Capital One always intends to appear as “Capital One” on its customers’ caller ID, but that sometimes how it appears is out of the company’s control.

The attention generated by the article, however, led Capital One to announce it would review the language in its contract. Six weeks later, as far as the public can see, that review hasn’t led to any change. I suspect Capital One will keep “reviewing” the language until the news cycle moves on, and then quietly leave the provisions in place.

We know what Capital One is doing, and it is obvious why it is doing it. The contract’s terms gets customers to agree to “voluntarily” waive protections under various statutes, to the extent they are legally allowed to grant such waivers. And the bank is doing so, in all likelihood, primarily to make bad credit card debt more valuable to third-party debt collectors who purchase it for pennies on the dollar and then proceed, as aggressively as the law allows, to collect the full face value of those debts.

Of course, it would be nice if Capital One was upfront with its customers about the fact that it is asking them to waive legal rights and protections that would otherwise apply if they fall behind on their credit card payments. But we don’t live in a world that it always very nice.

Instead, we live in a world in which credit card issuers take a significant financial risk by issuing unsecured debt to consumers, who buy things that are almost always worth less than the retail price as soon as they come out of the box. Card companies make up for that risk by charging very high interest rates, which is fair. Then they try to reduce the risk for which the high interest rates compensate them, which may be fair or unfair depending on the specific steps and the manner in which they are carried out.

Credit card companies have been known to try to get consumers to “reaffirm” debts that would otherwise have been discharged in bankruptcy – a practice that is almost never in the customer’s interest. They have been known to try to get relatives of deceased cardholders to pay debts for which the survivors are not legally liable. For some card issuers, and probably more third-party collectors, whatever works and is at least arguably within the law is OK.

Just because something is legal, however, doesn’t mean customers have to put up with it. Assuming Capital One’s review doesn’t lead to any changes, customers who don’t like the contract can take their business elsewhere.

Should you cut up your Capital One card? I did a few years ago, though for a different reason; the company instituted a new annual fee that I did not care to pay on a formerly fee-free card that I had used heavily, as my primary credit card, for years. After I closed that account, Capital One flooded my mailbox with offers for fee-free cards. I never took them up on it.

As for the aggressive credit agreements, if you are the sort of person who never over-indulges on credit card debt and who always pays the bill in full every month, the aggressive collection practices won’t apply to you. You can ignore them if you choose. I just wouldn’t take the bank’s word that it won’t really spoof your caller ID. I would assume the right asserted in the agreement will be used for telemarketing purposes to the extent the law allows.

If this bothers you greatly, get a card from another bank. If not, you can live with the knowledge that the card in your wallet means you are engaged in a surprisingly personal relationship with Capital One.

About Larry M. Elkin 551 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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