I saw this on the Huffington Post and thought it said a lot about CRM. A California woman has refused to pay her bill for a credit card she has with Bank of America. According to Huffington Post, Ann Minch “has carried a balance of several thousand dollars on her Bank of America credit card, making minimum monthly payments of about $130, sometimes paying and extra $50 or $100. She says she’s never missed a payment.”
Minch’s beef is that for all her good behavior and customer loyalty the bank repeatedly raised her interest rate this year, reaching 30 percent in July.
It gets better.
Minch decided to make her fight with the bank public and posted a four-minute video on YouTube to explain her actions and to demand the bank negotiate and reduce her rate. You can see the story here.
Minch is not alone, especially in these hard economic times. Many people carry balances on their cards and pay monthly interest. Banks are only too happy to carry the balance and collect the interest because at 15, 20 or even thirty percent interest it doesn’t take long for the borrower to pay the bank more than the original card balance. For banks, card balances are the gift that keeps on giving.
According to creditcards.com as of June 30, 2009 Bank of America was the number two general purpose card issuer ranked by outstanding debt ($150.82 billion). In 2008 BofA was number three for cards in circulation with 80.2 million and based on outstanding debt in 2008 it was number two with 19.25% of the market. It was also number two in profitability in 2008 earning $520 million in profit. Interestingly according to J.D. Power and Associates 2009 Credit Card Satisfaction rankings Bank of America was tenth with a score of 687 out of one thousand.
Credit cards are a form of unsecured loan with the key differentiator being the loan originator. It’s you and me, not some loan officer. The banks can’t walk down the hall to tell you to stop making silly loans to yourself all they have is the interest rate lever to do that with. So to influence behavior, they jack up the rates they charge in the hope that you’ll stop charging until you get your income and expenses in line.
The difficulty comes when money borrowed at one interest rate is suddenly assessed a higher rate. It’s like moving the goal posts and paradoxically, if you had trouble making a payment at 15 percent, 30 percent will not be an easier climb.
Lest you think that the bank has all the leverage here consider this. Minch says in her video that she owns no property and was laid off. There’s nothing that the bank can do to compel payment — they can’t seize her home or car and the bank can’t garnish her pay.
The bank can and probably will take her to court but as she correctly points out in the video, the civil courts are backlogged and it could take years to get the case heard. Meanwhile she rails against Bank of America and all banks that have received federal bailout funds from the people of the United States and then turn around and treat their customers the way she has been treated.
It looks like a Mexican standoff but it could turn into a circular firing squad because Minch’s goal now is not simply to get the bank to reduce her interest rate — she wants to spark a revolt against big financial institutions and in the video refers to them as “evil, thieving bastards”. So far her video has been seen about a hundred thousand times. It’s going viral thanks to social media and it points to the importance of every vendor having good policies and procedures in its CRM strategy (not just tools, strategy) to avoid this kind of nightmare scenario.