Would you pay a buck to have your credit card bill mailed to you?
Cardholders of such private-label plastic as Ann Taylor, Victoria's Secret, Bealls department stores and some 90 other retailers whose cards are issued through Dallas-based Alliance Data Systems were faced with just such a decision.
Alliance Data began notifying its cardholders in December 2009 that it will charge a $1 fee for mailed monthly statements beginning in February to offset its cost to comply with new credit card regulations, many of which kick in Feb. 22.
The bank encourages customers to use its free online statements, bill payment and e-mail alerts instead.
The Credit CARD Act of 2009, which outlaws a number of credit card billing practices including retroactive interest rate hikes and hidden over-limit fees, is expected to cost the banking industry $50 billion in lost revenue.
Watchdog groups, including the Center for Responsible Lending, predict a flourish of new credit card fees and marketing strategies as card issuers attempt to recoup those losses.
Expect thicker statements
But Alliance Data spokeswoman Shelley Whiddon says the buck-a-bill fee reflects legitimate additional business costs imposed by the CARD Act.
"It's not about us looking for a new means of generating revenue," she says.
"When we did a very careful assessment of what the CARD Act meant in terms of changing our monthly billing statement, it now has to include much more detail relating to the terms and conditions of the card. That effectively meant that we couldn't accomplish what we needed to accomplish on the number of pages that we had been mailing out in our monthly statement. We had to increase the amount of paper, production and ink, as well as the whole technical aspect of reconfiguring, reprogramming and recalibrating how we issue monthly bills."
Whiddon says private-label card retailers value the promotional and communications aspects of that monthly statement as much as its financial function.
"They're able to say, 'Thank you for shopping at XYZ Store. We noticed that you purchased these pants. Here is a 20 percent discount on your next purchase of shirts.' That (billing) statement is absolutely critical," says Whiddon. "In order to provide that aspect, we've got to look at ways to help offset the cost that we're incurring as a result of the legislation."
Penalizes those who remain offline
But Kathleen Day of the Center for Responsible Lending wonders why Alliance Data would, in effect, penalize cardholders who either cannot or will not conduct their banking online.
"I'm just surprised that it's unilateral and there are no exceptions," says Day. "This could disproportionately hurt the elderly, for example. There is still a large portion of the population that is not comfortable online. I can see where it might be a roadblock for some people trying to get their bills paid without having to incur an expense."
Whiddon says Alliance Data was aware it would catch some criticism for being among the first large card issuers to announce a new credit card fee, given the anti-bank mood of the country. She says she was unaware if any Alliance Data clients had expressed displeasure with the fee.
She points out that there are positives to the decision. Online statements have a reduced environmental impact, and private-label clients who don't use their cards regularly would only be dinged in those months when they receive a statement.
"The CARD Act is so complex, and it's still evolving; there are aspects of this bill that are being ruled on by the feds, and certain things have yet to be decided," she says. "But some of these changes in direction are positive."
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