Nowadays full disclosure is a marketing tool.
Some card issuers have long refused to provide credit bureaus with complete information on customers’ borrowing limits, in order to prevent competitors from poaching those customers.
Now credit reports are becoming more readily available to consumers, and Providian Financial Corp., which provides complete information to the bureaus, is touting its disclosure policies to win and keep customers.
“We are looking to create customer loyalty by providing more credit information,” said Chris Lewis, a senior vice president at the San Francisco company. It has reported full credit-limit data for at least five years and is trying to use others’ lack of transparency to its advantage, he said.
Providian also gives customers free online access to their FICO scores, which are updated monthly, Mr. Lewis said in an interview Wednesday at a conference in Washington. The service goes beyond the Fair and Accurate Credit Transactions Act of 2003, which requires each credit bureau to offer consumers one free credit report a year. (The law is being phased in; all consumers will be covered by September 2005.)
Mr. Lewis said Providian’s strategy was already working; repeated use of the online service has increased visits to its Web site.
A February 2003 Federal Reserve Board study found credit limit information missing from 46% of 301,000 consumer credit files. When given incomplete information, the bureaus estimate a credit limit using a customer’s highest balance, which is often lower than the actual limit. Lawmakers and consumer advocates have expressed concern that the lack of information unfairly lowers credit scores and makes borrowing pricier.
“Credit scores are being used not only to decide on lending, but also to price the lending,” Joel Winston, an associate director at the Federal Trade Commission, said at the Consumer Federation of America conference.
During a Senate Banking Committee hearing in August 2003, lawmakers criticized Capital One Financial Corp. for not reporting credit limits to the three major credit bureaus. Capital One has said that it considers such information proprietary, and that hanging onto it provides competitive advantages.
Early drafts of the FACT Act would have required “completeness” in the information provided by card companies, including credit limits. The final version requires only that the information be provided with “integrity.”
Gilbert Schwartz, a partner at the law firm Schwartz & Ballen LLP, called that provision “very vague and general.”
“Whether this practice of not reporting limits makes it into the rules the regulatory agencies propose is left to be seen,” he said.
