The Cost of Credit Cards
BROWN: It may be a jolly holiday season for U.S. merchants after all. A new report out today from the National Retail Federation predicts Black Friday shopping will spike 16 percent this year. And that is no surprise in the buy now pay later age in the American credit card. Well, this week, some of the credit card industry's darkest secrets are exposed in a new PBS frontline documentary. It's called the card game. And watch as a former bank insider shows what's hidden in the fine print of this free credit card offers that you get in the mail. Listen to this.</s>LOWELL BERGMAN, PRODUCER/CORRESPONDENT, "FRONTLINE": Open this one for me and tell me what you think. It's from Bank of America. On the back, it says zero percent intro</s>APR. SHAILESH MEHTA, FORMER CEO, PROVIDIAN FINANCIAL: But there is an asterisk or whatever the marks. I have to now read that footnote. I will remove my glasses to read it. It says for this see disclosure summary insert for details, and I have to find the disclosure summary which is the one here. So on the outside, the zero percent intro APR, in here it says that my APR is 11.9, 15.9 or 19.9, right? And the APR you receive is determined based on your creditworthiness. So I have no idea which one I'm going to get when they approve me.</s>BERGMAN: So the disclosure you say doesn't work.</s>MEHTA: I mean, look how much time it takes.</s>BERGMAN: Exactly.</s>MEHTA: I think that your average consumer is not going to be able to translate what the real pricing (ph) is.</s>BROWN: And frontline correspondent and producer Lowell Bergman is joining us right now to talk more about this. Lowell, so having just seen that clip from your report, who is the banking industry really targeting? Who's the ideal customer for them? Who are they trying to get to with these offers?</s>LOWELL BERGMAN, PRODUCER/CORRESPONDENT, "FRONTLINE": Traditionally, someone who will run a balance and never pay it off. That's been the model of the most profitable customer for most of the last 30 years. Although because of the economic turndown, you know, great recession that we're in the middle of, the banks are actually shedding a lot of customers who are questionable and riskier and they're looking now for people who can actually pay it off. That's becoming a new model for the industry and we're in that transition right now as well as new legislation that's coming into effect early next year.</s>BROWN: And let me go into a little deeper into some of this. You talk about that -- the regulations which take effect next year. The credit card insider, I know that you talked to as part of the documentary, revealed that what the banks think about their attempts to change their practices and let's listen to what he said.</s>SHAILESH MEHTA, FORMER CEO, PROVIDIAN FINANCIAL: Tell me the rules and then I will smart you up. You make the stupid laws, I'll comply and I'll make money. Its market we'll bear, you know, and there are always some desperate people who will take the product. Lending money to people is never a difficult exercise. OK? People will take money if you're willing to give it.</s>BROWN: What you found here is that banks are already scrambling to do whatever they can to get around these rules before they kick in. Talk us through some of the stuff that they're doing.</s>BERGMAN: Well, for example, a lot of people receive notification that they're going to have variable rate interest on their card. You might have gotten a card and it said 9.7 percent or 12 percent and they would have to notify you under the new -- on the new rules which actually this particular rule went into effect in August of a 45-day change in your interest rate. So to get around that, the banks have changed people's agreements so that there is a variable rate that will float with the cost of money and it will have something like 14 percent on top of whatever the cost of funds are for them. So they're trying to lock in different situations which will get around whatever the restrictions are in the law. The law will make it illegal for the first time in February for them to stop doing what's called universal default. That means where they can change your interest rate if you are late on some other bill, utility bill, a car payment or something else. So it will make some changes in the -- where people have complained about and called amongst its most abusive practices. At the same time there are a lot of loopholes. For instance small business cards are not covered at all, and nor does it get into debit cards which now exceed credit cards and the number of transactions that are going on and those debit card fees that mount up.</s>BROWN: Well, it's -- I know you've done a lot of research on this and a really interesting look at what's going on. Lowell Bergman from PBS, I appreciate your time tonight. Lowell, thanks so much.</s>BERGMAN: Thank you.</s>BROWN: Have you ever wondered what you would find if you dug into your family tree? More and more Americans are taking DNA tests and getting some pretty surprising results. You'll see next in our special series, "Genealogy: IdentityQuest." Stay with us.