American Express Membership Rewards - WSJ: Card Issuers Get Personal to Check Credit

I am creating this thread here because the most discussion worthy examples involve American Express, but other card issuers are also mentioned.

http://online.wsj.com/article/SB121383214440886577.html?mod=hps_us_inside_today [Subscription required]

Lenders have long relied on consumers' credit scores to decide whether to approve card applications and how much credit to extend and at what interest rate. Now, as financial firms face rising losses because of the weakening economy, some big card issuers are digging deeper into their customers' personal lives. They are scrutinizing where cardholders live, for example, and what line of work they are in.

First example:

...American Express Co. slashed the credit lines on three of the six AmEx cards that he uses for his business, even though he routinely pays them off every month. Two of the credit lines shrank to $1,000 from $6,000, and the third was reduced to $36,000 from $42,000.

...told that his available credit declined because he hadn't supplied information about his company to Dun & Bradstreet Corp...letter from AmEx notifying him that his $36,000 credit line was being cut to $4,300.

Second example:

... president of securities-brokerage firm ... one of his employees tried to book a block of hotel rooms for a seminar on the firm's corporate AmEx card. The card was declined,... subsequently discovered that AmEx had cut his $40,000 credit line to $4,500.

...customer-service representative told him that his business had been identified as "high risk" and that American Express was trying to reduce its exposure to the financial-services industry.

American Express was trying to reduce its exposure to the financial-services industry.

Perhaps it should close down then. :rolleyes:

Amex has been taking a lot of heat recently for the financial review procedures.

Not Amex, but my son had his Target Visa credit limit cut from 5K to 1K...he's only used the card the day he opened the account (to take advantage of the discount offered for new accounts) and paid it off immediately.

I think it's wise for cc companies to reduce their exposure -- IMO, things are going to get worse before they get better.

Amex has been taking a lot of heat recently for the financial review procedures.

What sort of heat from whom?

I had a B of A master card that I never use. I use to put one charge on it once a year just to keep the account active. This year after I charged one 100.00 item on the card- the next statement said they had reduced my limit of the card from 11,000.00 to 1,000.00 because of credit exposure.

I work for an oil company... go figure...

What sort of heat from whom?

There has been limited media coverage about it - some newspaper articles here and there. A Google search for Amex financial review brings up some interesting cardholder experiences.

Similar article in NY Times...

http://www.nytimes.com/2008/06/21/business/21credit.html

The most significant passage is this prediction near the end of the article...

Meredith Whitney, an Oppenheimer banking analyst, said the impact of the recent regulatory proposals on lender profits could be so severe that she expected the industry to pull back $2 trillion in outstanding credit lines by 2010. That would be a 45 percent reduction in credit currently available to consumers.

There are also anecdotes about the circumstances under which credit limits are being reduced today...

Example 3

...family therapist with a stable six-figure income, was stunned when she ... tried to buy about $30 worth of flowers with her American Express card. Her transaction was denied, she says, even though she insists she had rarely missed a payment and had just made one for $1,000....After inadvertently hitting her credit limit a few months ago and then falling behind on a mortgage payment, Ms. Pfitzer said her limit was lowered by American Express to $900 from $2,300.

Six-figure income with $2300 credit limit? Misses some credit card payments (rarely, she says), then misses mortgage payment and is stunned when it affects her credit cards? :rolleyes:

Example 4

...sales associate for a large residential real estate firm, said that the credit limit on his Citi Platinum Select Visa card had been reduced in April to $4,950 from $6,720 even though he says he never missed a payment and had no recent credit blemishes. A Citi spokesman... said... he had made six late payments within the last year.

It is interesting that Citi was willing to comment on an individual case. It's also interesting that the cardholder does not think paying late is as serious as missing a payment.

There has been limited media coverage about it - some newspaper articles here and there. A Google search for Amex financial review brings up some interesting cardholder experiences.

So how does this translate into "a lot of heat"? Seems to me that Amex has been doing it a lot (more than previously), and those affected are obviously not happy about it, but where's the heat?

So how does this translate into "a lot of heat"? Seems to me that Amex has been doing it a lot (more than previously), and those affected are obviously not happy about it, but where's the heat?

Go over to Creditboards, http://creditboards.com/forums/index.php?showforum=2
and look at the many AMEX F/R (Financial Review) threads...lots of crap about AMEX wanting access to past(and sometimes future) tax return info, etc.

Getting a little too nosy for a CC company, in my opinion.

Getting a little too nosy for a CC company, in my opinion.

Perhaps you are too young to remember when all credit card companies routinely required proof of income and endebtedness before opening an account? The fact that consumers are unhappy to provide evidence of their income or debts doesn't constitute any sort of "heat" which would alter American Express' decision making. It would take an inquiry or ruling from a government authority.

Perhaps you are too young to remember when all credit card companies routinely required proof of income and endebtedness before opening an account? The fact that consumers are unhappy to provide evidence of their income or debts doesn't constitute any sort of "heat" which would alter American Express' decision making. It would take an inquiry or ruling from a government authority.

I didn't think this thread would devolve into a debate regarding the semantics of the term "heat" :rolleyes: Take it to mean what you like, but the point is that Amex is getting a bit too nosy w/r/t wanting tax forms, etc. There is personal information there that one should not be required to divulge, particularly as there are other ways to verify income. If Amex put me through f/r I would just drop the card - YMMV.

...personal information there that one should not be required to divulge...

Examples?

American Express must be well aware that many cardholders will close their card accounts rather than provide the requested information. Evidently they conclude that keeping those accounts without the information is the greater risk. The aspect I don't understand is why people react with indignation. There is no personal dimension to a relationship with American Express or any other mass market card issuer.

Here is an example of the information Amex would receive from the IRS:

http://www.accuverify.com/sample.pdf

The only information I see that one should not be required to divulge is alimony, anything else?

How about dependents and their SSNs?

I didn't think this thread would devolve into a debate regarding the semantics of the term "heat" :rolleyes: Take it to mean what you like, but the point is that Amex is getting a bit too nosy w/r/t wanting tax forms, etc. There is personal information there that one should not be required to divulge, particularly as there are other ways to verify income. If Amex put me through f/r I would just drop the card - YMMV.

Sorry if we got hung up on the semantics, but "heat" would imply that amex would change thier ways. in my book that would happen only if
+ there was too much media attention
+ too much regulatory attention
+ too many card holders deserting

As to being too nosy, I don't think there is a rule of what they should be able to ask for. But again, if too many of these tests are carried out, and too many people object, and too many card holders leave, then they will feel real heat, and change their ways. However, as long as people not hit by an FR don't do anything, I'm not sure Amex cares.

How about dependents and their SSNs?

I have no concern about either, but I recognize that it is fashionable not to disclose social security numbers and that if you have adult dependents thier consent should be required. However, this would seem to be an issue to be raised with the IRS rather than lenders who request the transcripts. American Express extends unsecured credit and is not asking for anything more than one would provide to a mortgage lender. (BTW, thank you for posting the link to the dummy transcript.)

Issuing cards on the basis of nothing more than a FICO score and self-declared income is recent, and (I think) has created a false sense that lenders never need anything more. As recently as the 1980s a credit card application would result in a flurry of telephone or postal enquiries to your employer, bank, landlord or mortgage holder, and copies of tax returns were sometimes requested to support a request for an increased credit limit.

The issuers and customers have benefitted from automation, but I don't think anyone should be surprised that the lenders need to validate their decisions by sampling the hard data which actually determines creditworthiness. This year Citi asked us to provide evidence of assets, rather than income.

I have an Amex Business Gold, a Personal Gold, and a Blue card. I have been using them exclusively for at least two years now everywhere except places that don't accept Amex. The reason? They always treat their customers right.

Over the past couple years, it wasn't uncommon for me to run a balanace up to $30k in a month and pay it in full before the due date. Yesterday, I received a letter stating that my flex pay on the Personal Gold had been suspended. That didn't matter because I don't care if I have that or not.

Today, however, I tried to use the blue card for a small transaction (about $700) and it was declined. I thew the charge on another card and called Amex this evening. I learned that they reduced my Blue credit limit to a useless $2,500.

They said my credit hadn't changed at all since I initially opened my accounts. They verified my good credit score. They verified that I had never had a late payment with any Amex account and that they had no record of late payments with any other creditors. They said that due to the economy, their policies and credit factors have changed.

Nice.

So, I had a card that had a negligible % balance that is now at 98% due to the credit limit decrease. I'm sure my other cards will love to see that and probably follow suit.

And our economy comes spiraling down because corporate idiots (besides myself) are making stupid decisions.

I guess I'll pay the Amex cards all off this month and start using my other banks. I just thought I would share this for everybody else to read.

Have a good week,

David

I have an Amex Business Gold, a Personal Gold, and a Blue card. I have been using them exclusively for at least two years now everywhere except places that don't accept Amex. The reason? They always treat their customers right.

Over the past couple years, it wasn't uncommon for me to run a balanace up to $30k in a month and pay it in full before the due date. Yesterday, I received a letter stating that my flex pay on the Personal Gold had been suspended. That didn't matter because I don't care if I have that or not.

Today, however, I tried to use the blue card for a small transaction (about $700) and it was declined. I thew the charge on another card and called Amex this evening. I learned that they reduced my Blue credit limit to a useless $2,500.

They said my credit hadn't changed at all since I initially opened my accounts. They verified my good credit score. They verified that I had never had a late payment with any Amex account and that they had no record of late payments with any other creditors. They said that due to the economy, their policies and credit factors have changed.

Nice.

So, I had a card that had a negligible % balance that is now at 98% due to the credit limit decrease. I'm sure my other cards will love to see that and probably follow suit.

And our economy comes spiraling down because corporate idiots (besides myself) are making stupid decisions.

I guess I'll pay the Amex cards all off this month and start using my other banks. I just thought I would share this for everybody else to read.

Have a good week,

David

You will see it happening with other cards also. Check fatwallet.co finance forum.

Perhaps you are too young to remember when all credit card companies routinely required proof of income and endebtedness before opening an account? The fact that consumers are unhappy to provide evidence of their income or debts doesn't constitute any sort of "heat" which would alter American Express' decision making. It would take an inquiry or ruling from a government authority.

No, i'm not too young to remember 'proof' of income. I was referring to tax return info, etc, as being too 'nosy'.

Nobody's biz except me and the IRS as to what's on my tax returns.

Some of the more sleazy ccard co's long ago figured out that lowering one's credit limit increased the utilization % on that same ccard.
Interesting that more and more ccard co's are doing this, which in effect also lowers one's FICO score, thereby triggering higher rates for loans, worse utilization, more credit limit decreases, etc.

Traps anyone marginal in FICO hell.

Gotta watch them thar scumbags like a hawk, it's only money, but they want as much of -your- money as possible.

Nobody's biz except me and the IRS as to what's on my tax returns.

If you fell on hard times and needed a mortgage to purchase a home, and the lender required a copy of your tax returns, what would you do?

If you fell on hard times and needed a mortgage to purchase a home, and the lender required a copy of your tax returns, what would you do?


To paraphrase: "Nobody's biz, but the lender's if they want to give you a loan."

If you fell on hard times and needed a mortgage to purchase a home, and the lender required a copy of your tax returns, what would you do?

Well, first of all, if i 'fell on hard times' i sure wouldn't be looking to add a new mortgage to my monthly $outflow$.

I currently have a small mortgage, so not a problem for me.

What i'd actually do if mortgage shopping is go till i found a lender who didn't require tax returns. Even tho the credit industry is down the toilet right now, there's still competition in the market.

Is that it is NOT reasonable to summarily reduce credit by 90% or more with no rationale. Is it LEGAL? YES, fine.

BUT, why would any rational person choose to do business with a company that countless reports establish is capriciously targeting people, and for reasons ranging from who their home loan is with (GMAC by one report causes financial review and presumptive credit reductions by Amex!) to in my case, purchases at Costco being inherently suspect and Amex themselves admitted that high Coscto purchases were the unique factor (even though they are 'exclusive partners'!).

So the point of these stories should be that while, yes, Amex can choose to do this, those of us subjected to this can alert other FT members to help them avoid being a victim of this and can do all that we can to push back against this abusive and irrational behavior!

We aren't talking about judicious action here - these aren't 20% or 30% cuts in credit, which most could stomach or understand, but seemingly millions of people, based on reports that have been published and the CC companies and Amex's in particular own statemetns, and are getting cut by 80% or 90% - THAT is devastating as one member points out and common sense confirms, b/c then your utilization on that card is at nearly 100%, that spikes your credit down, then that snowballs into other cards being cut!! It is a sort of run on your individual bank being caused by the CC company.

If Mia has an argument as to why we should not be concerned and Amex cardholders should not be alerted to what is clearly becoming a pattern, then I'd like to hear it; these comments about 'they have a right to do a review' completely miss the point that: BASED ON CURSURY 'REVIEWS' AT BEST, AMEX AND OTHERS ARE MAKING DRAMATIC REVERSALS IN THE GRANTS OF CREDIT THEY HAVE OFFERED WITH OFTEN DEVASTATING EFFECTS ON CONSUMERS WHO HAVE COUNTED ON THE BANKS BEING STABLE, REASONABLE, AND MODERATE.

As I post about at length elsewhere on here, I was subjected to a TWO month review, my accounts were canceled (7 of them with about 100k plus in credit even without a single late payment or any change in real circumstances whatsoever), then after a lengthy appeal the accounts were fully restored.

So I prevailed, but is that not TOO EXTREME A PROCESS and far too reactionary an initial result? For the three weeks my accounts were canceled, my credit utilization shot up some; luckily I have the resources that I was aggressively paying down all possible accounts to zero, so my score wasn't crushed; but absent some rather dramatic effort on my part, I could have been in a downward spiral leading to a virtual crash.

Think about this parallel; if the government did to these credit companies what they are doing to consumers, as the economy quakes they would see the lack of stability in these firms and would withdraw all funding! Is that what happens? No - completely the opposite. The credit companies are getting breaks and support from OUR government which runs primarily on CONSUMER FUNDS (about 2/3 of all taxes, I believe), then is turning around AND COMPLETELY YANKING THE RUG OUT FROM UNDER THE CONSUMERS THAT FUND THE GOVERNMENT, CAUSING THOSE CONSUMERS TO SPIRAL INTO PERSONAL ECONOMIC CATASTROPHE. Freakin' outrageous.

Legal? Maybe. Something we should just accept? No way! So, at the very least, DON'T count on Amex as you only or EVEN main supplier of credit these days, and stand up and fight back against this absurd and irrational retraction of credit.

If Amex is going to do this, the US government should curtail our federal banking system's support of Amex.

Hello again Modest,

I think Mia was only commenting on whether or not it is reasonable to ask for supporting documents to substantiate a certain credit. It was not about how Amex used that information or how fair the ourcome of all FRs are. but she does point out that if you start missing payments and levering up, it will affect your credit.

To address some of your points though. Not having missed a payment in the past isn't always a good indicator of future performance, and amex is trying to cut losses before they happen. My guess is that their credit card issuing got a little out of hand, just like other issuers recently, and they are now dialing back their exposure. Nothing wrong with that.

What is wrong, of course, is when they make it hard for good customers (like yourself) to remain customers. But again, Amex knows you can't make an omelette without breaking some eggs, and they are willing to accept the loss of some good customers if it means that their credit exposure is better managed as a whole.

Amex isn't a public service, and as long as they are not biased or discriminating (as defined by the constitution) when doing their FRs, regulators will not interfere.

And until the FRs gets really out of hand, affecting a significant part of card holders, I suspect people who value the benefits of their cards, will hang on to them. We should all follow your advice and have a backup card though. (And I suspect we all do.)

I haven't had any problems with Amex financial review--and I have several Amex cards.

But, IMHO, there is a very interesting issue here which has not been mentioned, namely potential violation of the Equal Credit Opportunity Act and other fair credit laws.

One big reason credit scoring has become so popular was that it provided the credit card companies with cover against claims of racial and other discrimination in granting credit. The credit score is purportedly "objective." Thus, when used in granting (or not granting) credit, there is, arguably, no discrimination when credit score is the determining factor (and, if, you believe that, I have a bridge in Brooklyn for you).

Now, it looks as though the financial review, as I read about it here, does not involve credit scoring, but is a personalized decision to extend or not to extend credit. One may reasonably wonder if prohibitied factors come into play; including, perhaps, surrogates for prohibited criteria such as race, religion, disabled status, etc.--perhaps geographical location?

Remember, a big reason that credit card companies are required to respond to an application within thirty days and to provide the actual reasons for denial if the application is not granted is that it used to be SOP to send apps from disfavored groups directly to the circular file.

I do wonder how Amex claims it is avoiding this issue in financial reviews. :confused:

Well, first of all, if i 'fell on hard times' i sure wouldn't be looking to add a new mortgage to my monthly $outflow$.

I currently have a small mortgage, so not a problem for me.

What i'd actually do if mortgage shopping is go till i found a lender who didn't require tax returns. Even tho the credit industry is down the toilet right now, there's still competition in the market.

This is the good part; that there is still competition in the market...
If Amex makes someone mad, then there are plenty of banks with plenty of good credit cards and one can imediately switch its business. So why bother sending a long letter to Amex. Just cancelled the cards progresively while getting new ones with another bank (rewards will always be there).

It is amazing how people sometimes have a hard time divorcing an institution that treats them bad. And this goes to all banks, as I am sure plenty of small, medium and big banks will be happy to get Amex´s best customers.

I work in the banking industry (credit card industry) in a country where annual fees are still there for almost 95% of the credit cards and people pay them as long as they can access a credit line (yes, riskier and amazing, as we do not even have a FICO score in the credit report). But in the US, where Credit Cards are a commodity, people can switch banks as easy as they switch clothes. Just leave one and go to the bank that treats you correctly, calls for information and tries to solve the problem by talking to the customer via human beings, and not demanding suficient proof of money. If a client is subprime, you ll see it in the FICO score and for AMEX, they usually have prime clients that relly on those credit lines to keep doing business in order to pay their cards in full.

If you are in the credit card business, you will always have a default risk, but at first, why in the world did you give the clients those huge lines of credit if you can´t maintain them during the hard times. It is like giving a little kid two pops, and then taking one from him. You should have only given him one and he would have been a happy kid instead of hating you for taking one from him, although he got to keep the second one.

It is like giving a little kid two pops, and then taking one from him. You should have only given him one and he would have been a happy kid instead of hating you for taking one from him, although he got to keep the second one.


Best entry in this thread so far.

Amex has a long history of poor management of its credit portfolio. There was a period in the early 90s when Optima had such poor internal controls that it wasn't reporting properly even with Amex. Apparently those of us with Optima cards could have been in default without any consequences.

So although it has undoubtedly targeted some cardholders unfairly, I suspect that Amex is now panicking as it sees deterioration across its cardholder base (as Amex itself admitted last quarter is happening). Again, I'm not saying each cardholder is treated fairly as a result, but this is probably one reason that people who rightly assert that they have a perfect record (as opposed to some posts I've read on other boards where people claim to have a perfect payment record and then reveal details that suggest anything but) all of a sudden find themselves under suspicion. The industry term is "straights" -- people who go from perfect payment to zero payment/default within one or two billing cycles. I have no idea how you'd predict who will do that, but I bet that's what Amex is trying to forestall with these aggressive review tactics.

This is just my own unsupported opinion (so what else is new on these boards) but Amex has always struck me as having an attitude that its cardholders were different and more elite than the average Visa/MC (or, God forbid, Discover) cardholder. This may have been true 20 years ago and may still be true for annual spend on the premium charge cards, but Amex seems to have held onto this mentality even as it entered the broader credit card markets aggressively, extending credit to people far beyond its traditional T&E base. Now Amex is learning the hard way that as a result it has acquired a credit portfolio that looks much more like the average and that that has consequences, and they're retracting (arbitrarily, to judge by some posts) in response. Again, this doesn't defend their treatment of individual cardholders, I'm just trying to understand how they see the world right now.

I took some time off (over a year) between careers a few years ago and carefully made sure before doing so that I had very little outstanding debt to service. Throughout that period, Amex kept increasing my Hilton Platinum Optima line of credit without any request -- or even any usage, I basically put the card on ice -- on my part. OK, I am 750+ FICO and no missed payments, but IMHO this is JUST PLAIN NUTS. I HAD NO INCOME and was living off savings. Now who should I blame I had taken "advantage" of those credit line increases to live beyond my (non-existent) income? Amex for such an idiotic credit model? Or myself for not understanding that ***I*** am the best judge of my means, not some credit-scoring model that has never met me and learned what a charming guy I am? Not everyone who has gotten into trouble with Amex has taken advantage of credit they should have known better than to use in the first place -- some seem like honest businesspeople with the misfortune to be in industries or locations Amex considers risky -- but I've read enough posts of the "one year out of college, got an initial $2,000 LOC, made three CLIs online to $35,000 within six months, and OMG now Amex wants some financial data from me" variety. Again, was Amex on crack to issue those CLIs in the first place? Yes. But were you on crack to think that you actually could support that kind of debt? Yes again.

Now back to work.

I am not entirely sure if I am schmuck or what the reason is why I entirely support American Express by their decisions of cutting down CL's. Let's face it, we are in a society where people live way above their means and the entire economy showed what can happen. How many people where under the impression that they have to give the CC Companies a higher income than they actually have to increase their line of credit and all of the sudden they filed bankruptcy.

Also, how many people think about that each CC/Loan Company by law has to share their information with the IRS and out of the blue you get a nice letter from the IRS with a nice note that you are being back taxed due to information provided to the IRS by one of your creditors. I think the response from all the creditors are a perfect idea and realistic as well. Why are there people with an annual income from 40k having 15k CL's ?

Yes I think that creditors did a lot of mistakes in the mortgage as well as the credit card industry however you have to keep in mind that American Express Centurion Bank is actually one of the bank with the lowest write offs which in a long run will affect the existing as well as future customers in a positive way.

Please on top of all of that you have to keep in mind that American Express as well as all other CC Companies are businesses and they have to make money !!! Certainly they could save by outsourcing all their calling centers but would you support that ???

Certainly they could save by outsourcing all their calling centers but would you support that ???

They already did. You must not have called them in the past few years.

I support the rest of your post though, noting that some - like Mr. modest - are complaining about unfair/unreasonable adjustment of CLs or just the FR process being less than polite.

Certainly they could save by outsourcing all their calling centers but would you support that?

They already did. You must not have called them in the past few years.
... or have one of AmEx' premium products; my Blue would get India all the time, but I never did on my Plat.

... or have one of AmEx' premium products; my Blue would get India all the time, but I never did on my Plat.

That is interesting. I never got India on the phone and frankly I was unaware of American Express outsourcing their Customer Service to India (unless you are a AmEx Holder in India :D) Never did with the Blue nor with the Plat.

... or have one of AmEx' premium products; my Blue would get India all the time, but I never did on my Plat.

with plat i seem to get canada a lot, judging by the accents, although with the travel service it could be anywhere. i've occasionally had folks with the travel service whose accents i simply couldn't understand at all (and i've lived in lots of foreign countries and become used to a wide range of ways of speaking english) and i had to call back and hope for better on a second call.

I get the US most of the time, but India some. When there's fraud alert (questionable charge) it is mostly India.

I have mostly gold cards and hotel and airline branded Amex CCs. My annual spend is significant across cards.

I get the US most of the time, but India some. When there's fraud alert (questionable charge) it is mostly India.

I have mostly gold cards and branded CCs. My annual spend is super high though.

Just to clarify, you are talking about all cc'companies combined or only about amex ? I am sorry but I am lost since I never managed to get an Indian Rep on the Phone. With Cap1 yes but not with amex.

Floppy,

I'm only talking about Amex.

To further verify, I have even visited their offices in New Delhi (not as a card holder). Both the one targeted at getting Indian clients, and the call centers servicing the US (and other parts of the world).

They have Indian operations (and not just in Delhi). This cannot be disputed. They seem to be much better at implementing it though, and not agressively shipping all calls to India.

Floppy,

I'm only talking about Amex.

To further verify, I have even visited their offices in New Delhi (not as a card holder). Both the one targeted at getting Indian clients, and the call centers servicing the US (and other parts of the world).

They have Indian operations (and not just in Delhi). This cannot be disputed. They seem to be much better at implementing it though, and not agressively shipping all calls to India.

Wow that is interesting. I was unaware of that. Well than I guess I was always lucky that I ended up in Fort Lauderdale Florida.

Thanks