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spike420211

By BusinessWeek
[yanked from MSN.com-kinda like USA Today McNews Very Happy

]

Most borrowers know a late payment or high outstanding balance can hurt their credit. But what about frequenting a massage parlor, retreading a tire or visiting a marriage counselor? Such activities count, too, according to a suit filed June 10 by the Federal Trade Commission in Atlanta federal court against card issuer CompuCredit.

Lenders, insurers, and other financial firms use credit scoring systems to make a host of decisions about consumers, including the interest rate on their mortgages, the limits on their credit cards and the monthly premiums for their auto coverage [obv. your driving record doesn't matter]. Some rely heavily on FICO, a three-digit score developed by Minneapolis-based financial firm Fair Isaac, while others use proprietary models developed by statisticians. But companies don't disclose what's baked into their formulas, leaving many borrowers to wonder what factors determine their financial fate.

The FTC suit against Atlanta's CompuCredit for allegedly "deceptive" marketing practices offers a rare look inside the opaque business of credit scoring. It reveals mechanisms that consumer advocates and politicians have long suspected exist -- in which purchasing behavior, not just payment history, matters.

The allegations, in part, focus on CompuCredit's Aspire Visa, a subprime credit card for risky borrowers. The FTC claims that CompuCredit didn't properly disclose that it monitored spending and cut credit lines if consumers used their cards at certain places. Among them: tire and retreading shops [?????wtf, esp. if you're buying cheep retreads so u can buy GAS instead], massage parlors, bars, billiard halls and marriage counseling offices.

"The company touted that cardholders could use their credit cards anywhere," says J. Reilly Dolan, assistant director for financial practices at the FTC. "What they didn't say was that you could be punished for specific kinds of purchases." Very Happy

Even if they were to abolish UIGEA tomorrow, I'd still use Western Union to reload. DUCY?

spike420211

missjugsalot · Posted: Sun Aug 24, 2008 6:23 pm Post subject:

sorry spike, cant help you, finance is not my forte'.

Though I will comment on sub prime mortgage thing. The Congress was promoting this type of lending practice. They wanted lenders to give more "sub-prime people" a loan. 15-20 yrs ago, to buy a house you needed 20 % down, or you could get first time buyer type program through FHA. Then all types of creative loans started popping up. At the end it was no money down, very little proof of income, interest only loans. So people who had no money to put down, max out their ability to pay on an interest only loan, for a house that has lost something like 20% of its value. My point is, the Congress in several ways helped create the problem, and of course, now act like they had nothing to do with it. Not only that, now they tells us they are the ones who must fix this terrible problem, that they of course had no hand in creating whatsoever.

I would also say that credit card companies have been engaged in "sub-prime lending" for a long time. They give credit to those who shouldn't have it, at 21% interest, with a clause allowing them to raise it to 36% if the borrower makes one late payment. They prey on people, and I say fk them. It doesn't surprise me that they would be attempting to mitigate their risk somewhat, because you know when you don't have any money, the credit card companies are the first bastards you stop paying.

Hopefully feihua-sama will stop by, I suspect he might know a thing or two about this.

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