Banks and Credit Cards – American Lending Trends

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Banks and Credit Cards

Source: web

Ah – banks and credit cards – two dynamics that go hand in hand. Wonder what your bank is up to these days? Maybe it’s offering new credit cards? Maybe it’s going to great lengths to end world hunger or at least, overwhelming credit card debt, right? If you’ve ever wondered what your bank was doing for you, as the customer, here’s the lowdown. This is what the banks are up to this week.

For the most part, the big banks saw their profits soar for the first half of this year. Quarterly earnings are being announced and as those numbers trickle in, we see just how well the banks are faring.

Banks more often than not lowered their provisions for credit losses. We, as consumers, continue with paying down our debt and as a result, banks and credit cards aren’t the same profitable “sure thing” as they once were. Remember, banks have already been looking for ways to increase their revenue for the losses due to the 2010 CARD Act requirements.

Citi Fail

As we all know by now, banks use what are called public storehouses. This is where they store all of that information they say isn’t being stored or isn’t being stored for long periods of time. The reason consumers worry about these massive virtual warehouses is because no one was ever able to give straight answers. Turns out, consumers finally got a few answers, but from an unlikely source. Citi announced it has failed in its efforts of protecting consumer information, including social security numbers, birthdays and other consumer-sensitive information of close to 150,000 customers. As a result, that information’s been left vulnerable.

The information is limited, so far, to Citi customers who filed for bankruptcy between 2007 and 2011. Citi owned up to the fact that it failed to properly redact that information before it went into a government database. As a result of an agreement with the Justice Department Citi will now redact that information at its own expense. It must also notify every debtor whose information was leaked and it must also offer those debtors a year of free credit monitoring.

Citi is based in New York, but the consumers who were affected are scattered across the country over 85 different jurisdictions.

It was Citi that discovered the problem with its software. It saw that the data on bankruptcy filings for secured loans was not redacting the necessary information.

The redaction issues primarily resulted from a limitation in the technology Citi had used to redact personally identifiable information in the filings,

the bank said in a statement released on Friday.

As a result of this limitation in technology, personally identifiable information could be exposed and read if electronic versions of the court records were accessed and downloaded from the courts’ online docket system and if the person downloading the information had the technical knowledge and software to restore the redacted information.

Here’s the bigger problem, though. The bank has known for more than two years that the redactions weren’t in compliance. The bank had just updated its computer systems and while it worked out the glitches and re-trained its employees, it failed to see those efforts through by notifying consumers.

We immediately began working on a remediation plan to restrict electronic access to the relevant filings and substitute new court filings in which the personally identifiable information is permanently concealed,

the bank said. It also didn’t let on that it wasn’t limited to consumers in on area of the nation. It wasn’t until a couple of weeks ago that an independent auditor was able to verify Citi’s promise of notifying consumers and offering the complimentary credit monitoring.

As far as Citi is concerned, the problem’s been addressed and measures in place to remedy the situation,

We take the safeguarding of customer information very seriously,

the bank said.

We are not aware of any instances in which personal information was accessed or downloaded and have no reason to believe that any personal information was misused.

Wells Fargo Lacks in Credit Card Consumers

Wells Fargo is known for the most bank branches in the United States. It also leads the nation is the most mortgages, small business loans, commercial real estate loans and even the most agricultural loans. It has, for the most part, a satisfied customer base. Except for its credit cards. As a result, the bank’s CEO John Stumpf announced a new effort to get those satisfied customers in the doors to sign up for its credit cards. Only 35 percent of the bank’s customers are also carrying its credit cards. That’s up 4 percent from a year ago, but not enough to bring it up to par with its biggest competitors. Stumpf told the media,

We are trying to broaden our card offerings. We should double our share.

Banks and Credit Cards and Mortgages, Too

Meanwhile, both Wells Fargo and Citi have slashed their jobs in their respective mortgage units. Also, both Wells Fargo and Citigroup are laying off hundreds of employees, and are expecting even more this year. They say rising interest rates will likely result in a plummet of home refinancing efforts. Both also cite “heavy exposure to mortgages” this year will also play a role. Banks have historically shifted their efforts in anticipation of what the markets are doing now and what they might be doing in the near future. These are calculated risks the two are taking to offset some of those potential problems. As we can see, that’s not a bad decision for either bank.

Of course, everyone is still eyeing the massive bankruptcy filing in Detroit, wondering if the president will encourage a federal bailout. That doesn’t seem to be affecting Wall Street, at least at this point. Between Citi’s efforts of improving transparency while also putting into place those 150, 000 – plus credit monitoring accounts along with Wells Fargo pushing it credit card products, it’s going to be an interesting few weeks as we see how well any of these scenarios play out.

Has your bank made any big announcements? Share your stories with us along with how it affects you and your family.

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About Author

David is a CPA and has spent the past decade as a financial adviser helping clients meet their fiscal objectives. With an appreciation for journalism, he has spent the past few years overseeing several financial columns as well as writing two previous finance blogs. He resides on the East Coast with his wife and two sons and has guided many through the recent recession while providing a no-nonsense approach to spending and saving.


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