Posted: February 10th, 2011 | Author: Joe | Filed under: Credit | Tags: bad credit, Credit, Credit Cards, Credit score, Debt, First Premier, subprime credit card | 1 Comment »
I blogged about First Premier Bank Credit Card offer exploiting a credit card loophole in the 2009 CARD act a while ago. I just couldn’t believe that a bank would not only charge customers 79.9% interest but they actually advertised the card to new customers! To be fair, it was targeting people with lousy credit histories, but it turns out that it may have been a bad business move for the bank.
First Premier Bank credit card offer with 79.9% APR is a hit.
According to this article, the initial offering of 79.9% proved popular with customers! What’s this you say? People actually wanted a card with such insane rates? Yes.
It turns out that so many people with poor credit saw it as an opportunity to rack up hundreds to thousands in free charges – and defaulted!
Muhahhaha…
Serves First Premier right!
Miles Beacom, the CEO said:
“A lot of the people ran up the card, defaulted and went directly to charge off.”
As a result, they dropped the rate to 59.9%. “We also tested it at 23%, 33%, 45%, but 59.9% is the one that shows the best performance and where the organization can market the product,”
I’m actually surprised the bank is still offering the card, since the CARD Act capped fees at a max of 25%, and the bank has said they were previously relying on even higher rates to offset the default risk of the customers.
Despite the $135 in annual fees and sky-high interest rates, the company claims to service about 3 million people, with 200,000-300,000 applications each month!
Strange days indeed.
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Posted: January 14th, 2010 | Author: Joe | Filed under: Credit, Debt | Tags: bad credit, Credit, Credit Cards, Credit score, Debt, First Premier, subprime credit card | 4 Comments »
The remainder of the new Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 regulations go into effect in February 21st, and a lot of credit card companies are making changes before those changes are banned.
One such change is hiking the APR. Come February, credit card companies will only be allowed to raise the interest rate on a credit card if:
- The card holder is significantly late on his payment
- The underlying interest rate index changes
In what has to be one of the most outrageous exploits of this loophole First Premier Bank is rushing to abuse it’s card holder to beat the February clock – with a 79.9% APR!
I suppose it isn’t surprising, since First Premier Bank is a subprime credit card issuer and hence has a reputation for exploiting people with poor credit.
Here’s the loophole:
Beginning in February, fees are capped at 25% of the card’s limit. First Premier’s subprime credit card has a $250 credit line, and currently carries a minimum $256 in fees. Since the CARD act limits fees, but not interest rates, Premier has altered the card offering as follows:
Maximum credit line: $300
Fees: $75 (25% of $300)
Over your limit penalty: $29, if balance tops $300
APR: 79.9%!
As mentioned above, First Premier offers credit cards to subprime borrowers, i.e. those with bad credit and little opportunity to get access to credit. If this isn’t usury, I don’t know what is…
For their part, First Premier has said that existing card holders will still be able to keep their cards though no decision has been made regarding hiking those rates. They also state that they need to “price our product based on the risk associated with this market.”
First Premier typically works with those whose credit score is under 700, but in the 3rd quarter of 2009 those offers were down to 84% from 91% in 2008, so they appear to be targeting subprime borrowers a bit less.
Source
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