'Intelligent discontent is the mainspring of civilization.' -- Eugene V. Debs

Monday, December 22, 2008

American Express Finds a Way to Reduce Credit to African Americans 

From today's Atlanta Constitution:

Kevin D. Johnson returned from a dreamy Jamaican honeymoon in October eager to check out wedding photos and help his new wife open stacks of beautifully wrapped wedding gifts.

Before getting distracted by the fun stuff, the 29-year-old entrepreneur opened the mail. Johnson’s mood soured when he got to a letter from American Express, saying it had slashed the credit limit on his account.

Kevin Johnson, 29, sits in his Peachtree Street office. After returning from his honeymoon, American Express informed him it was lowering his credit limit.

Johnson was surprised, since he has a perfect payment history and a high credit score. And he was floored by one of the reasons American Express cited: It didn’t like where he shopped.

“Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express,” the letter said. Johnson complained to American Express by phone and letter.

“That doesn’t have anything to do with whether I’m a paying customer or not,” he said in an interview.

Johnson checked his charges to try to figure out what might have raised a red flag in the American Express data-mining model. He didn’t see anything but typical transactions, including purchases at Amazon, Ruby Tuesday, Wal-Mart, Starbucks and Federal Express.

“I understand the need for and the power of predictive analytics,” Johnson said, “But I think they have crossed the line.”

American Express declined to discuss Johnson’s account. But it confirmed that it examines spending patterns. It’s just one of many tactics that credit card companies are using to try to keep default rates from growing higher. Along with studying shopping habits, American Express considers which mortgage lender a customer uses and whether the customer owns a home in an area where housing prices are declining.

These factors are combined with a review of other details to decide whether to adjust a credit limit.

Mr. Johnson, if you haven't already guessed is black, as you can clearly see from his photograph, which accompanies the story. He is also a successful executive, as explained in the article as well. One can only imagine how many African Americans less fortunate have already experienced reductions in credible regardless of their history of payment. Just as people of color were disproportionately victimized by the housing bubble, they are likewise going to be targeted to during the recession.

Labels: , , , ,

This page is powered by Blogger. Isn't yours?