Magazine article American Banker

Credit Reports Should List Secured Cards, Leading Lenders Say

Magazine article American Banker

Credit Reports Should List Secured Cards, Leading Lenders Say

Article excerpt

In a move that could undercut the burgeoning market for secured credit cards, an influential group of lenders has agreed that the cards should be flagged on credit bureau reports.

As a result of the consensus at an Associated Credit Bureaus meeting in Dallas this month, the so-called metro tape that many bankers use to report consumer credit information is being altered so lenders can indicate whether an account is secured.

This will put pressure on banks to provide information that very few provide today.

"The group believes that credit grantors need to report the truth, because it is the only true reflection of a customer's credit history," said John V. Skinner, president of Jewelers Financial Services of Irving, Tex., who led the discussion at the meeting.

Stigma of a Bad Risk

The idea could run into resistance, however. Some fear the disclosure would stigmatize the cardholders as bad risks and reduce the product's appeal.

"Give me a reason why we should report it, other than to identify or tag these customers as bad credit risks," said David A. Alexander, marketing manager for First Consumers National Bank of Beaverton, Ore. The unit of Chicago-based Spiegel, Inc. has been issuing secured credit cards since 1989.

Gerri Detweiler, director of the Bank Card Holders of America, agreed that the change could be bad news for consumers who use the cards.

Different Profiles

"Reporting secured cards as regular bank cards serves the best interest of the consumer and the grantor," the consumer advocate said. "The problem with singling out secured cards is that they attract a variety of customers. You might be lumping in a widow who has never had a credit history with someone who has filed for bankruptcy three times."

Secured cards have become one of the hottest new product categories on the menu of many credit card issuers. …

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