Members Split on What to Tell The Credit Reporting Agencies
Secured credit cards are creating a tricky situation for issuers.
As it becomes clear that consumer education is the key to restoring confidence in this product that had a shady past, issuers are hesitant to single out secured cards on credit reporting forms because they believe consumers will feel stigmatized.
Members of the MasterCard-sponsored Securd Card Advisory forum agreed last week that the industry needs to do a better job of marketing the cards. But the members remained divided about whether issuers should report secured card accounts as such to credit agencies.
MasterCard International Inc. has spearheaded the effort to educate consumers and issuers on the merits of secured cards, whose tarnished image issuers are trying to polish up.
"People still remember secured cards as the '900' number on television, and that is not the case anymore," said Ronald T. Urquhart, a forum member and the vice president of consumer credit for People's Bank of Bridgeport, Conn.
The secured card advisory forum, which has met three times since its inception last year, is composed of 12 representatives of leading secured card issuers and officials of the New York MasterCard association.
The group decided to form a subcommittee to see if there is a consensus on reporting secured cards on the so-called "metro tape," a commonly used record of consumer credit information.
The decisions that come from the subcommittee could help establish industry standards.
The metro tape, which was revised in January, includes a new category to denote secured cards. Before the category was added, issuers could not report secured and unsecured credit cards differently.
Some industry types believe the secured card's appeal would be diminished if consumers knew their credit reports reflected that they own such a card.
Opting to Report
Mr. Urquhart, whose bank has a strong secured card program, said after the two-day meeting that he decided People's Bank will use the new secured card category.
"The more information and accuracy you can provide on a credit bureau form, the more everyone benefits," he said.
Another forum member, Jill Brader, vice president of marketing for Key Federal Savings Bank of Havre de Grace, Md., disagreed.
"Consumers don't want anyone to know that they have a secured card," she said. Also, she argued, that Key Federal's product offers both unsecured and secured credit, which would be impossible to express on the metro tape.
Key Federal customers can borrow as much as 150% of their cash deposit, which determines the size of their credit limit.
Even though issuers have been able to denote secured cards since January, most have not, say the major credit reporting companies.
TRW Information Systems and Services reports that only 10 of its 100,000 customers are filling in the new category. Equifax Financial Information Services says that less than 10% of its customers are flagging secured cards.
When it comes to education, the panel members discussed a number of ways to assuage consumer's suspicions. One strategy that gained approval involves sending consumers direct mail solicitations with educational brochures.
MasterCard developed "Credit Card Options," a brochure that provides answers to the most frequently asked questions about secured cards. It is available to consumers who call a toll free number.
"The idea is to answer questions before they are asked," said Mr. Urquhart, who sees the industry's greatest challenge as, "making the public understand that [secured cards] are good products."