Chase, Manhattan and Yale

A few years ago I cancelled my Citibank MasterCard. It had been my first real credit card and I’d had it for almost 20 years. The cancellation was a consequence of my habit of reading fine print; I think it was the privacy policy that tipped the balance. I replaced the Citibank card with a Yale Visa card. I’ve used the new card for a couple of years and I’ve been happy with it.

Last night I opened a piece of mail from Bank One (which actually issues the card; Yale is not in the credit card business). It seems that “the JPMorgan Chase and Bank One holding companies merged in July” and my card will be subject to new rules as of January 3, 2005. A lot of these new rules have to do with default rates. If my account is judged to be in default then the late fee becomes $39.00 and the interest rate rate will be 23.99% above prime (currently about 29% and likely to go higher). When would I be judged in default? It doesn’t take much. One late payment, exceeding the credit limit, or failing “to make a payment to another creditor when due” is sufficient. (The last bit is especially good; how are they going to know?). Furthermore, being in default in any Chase account can put you in default for any others. Whether one is in default, and the rate charged if one is in default, is up to them. Although I’m outraged, I suspect that they will not be using this tactic with me. I can pay off my credit card each month, I always have, and if I were declared to be in default I would cancel the card immediately. No, their target here is not me, but the consumer who is over his head in debt and is beginning to have trouble paying his bills. By declaring default Chase can extract as much money as possible (remember, the rate is up to them) or induce him or her to switch to another lender before declaring bankruptcy. Ideally, they would get as much out each customer as possible. I imagine that there are people, -- ‘specialists,’ I suppose they are called -- whose job it is to figure out how to maximize this profit. I can’t imagine a less ethical profession. These policies are clearly designed to prey on those who are financially weak. I presume that they are legal, but they are clearly wrong.

Although I’m not personally worried, some questions come to mind. Is this really good for Chase Manhattan? Do their corporate clients want to do business with a firm whose consumer business plan amounts to loan sharking? Is this really legal in Maryland? Is it really legal in New York? Does Eliot Spitzer know about this? Does Yale know about this? Does Yale profit from this? Do they really intend to introduce their alumni to a financial relationship designed to finish them off if they should ever have financial problems? How often does the agreement between Yale and Chase get reviewed? Does the agreement between Bank One and Yale automatically get transferred to Chase? Is Yale in a position to negotiate new terms? Does Yale have anything to do with this card at all (aside from the picture of Harkness tower)? Does Yale really want to be associated with Chase Manhattan? What about Manhattan? Does Manhattan Borough President C. Virginia Fields know about this? What about mayor Bloomberg? What about the committee choosing the site for the 2012 Olympics?

Do you know the answers to these questions? If you’re interested, please send me an email.