Avoiding unsolicited credit card offers

Citation

Pitta, D.A. (2006), "Avoiding unsolicited credit card offers", Journal of Consumer Marketing, Vol. 23 No. 5. https://doi.org/10.1108/jcm.2006.07723eag.001

Avoiding unsolicited credit card offers

As a professor at the Merrick School of Business at the University of Baltimore (UofB), I take pride in the accomplishments of our alumni. We professors stress that marketers cannot control their world and can only react to changes in their environment. One group of our alumni took that advice to heart. During the 1980s interest rates on loans, mortgages and consumer credit skyrocketed. The state of Maryland, known for its anti-business posture, reacted by passing a law restricting legal interest rates to 18 percent for consumer credit. The local banking industry reacted by first considering bankruptcy, then learning how to avoid the legislation. That group of UofB alumni knew that there was a robust trunk data link between Baltimore, their current headquarters town, and Wilmington, Delaware, which was just up the road. Delaware, a notable pro-business state, did not enact consumer credit limit legislation and the Delaware legislature seemed to be against such moves. Consequently, the UofB alumni moved their bank’s entire credit card operation from Maryland to Delaware. Thus, Maryland National Bank became MNB and Wilmington grew appreciably.

That strategy illustrated the keen intelligence of the MNB management team. It foreshadowed one of the most successful and profitable marketing products in consumer credit, affinity programs. That noted group of UofB alumni decided that there was a market for a credit card bearing an organization’s name and logo. The first credit cards were designed to tap into university alumni. Since alumni relations are serious business, most universities maintain current name and address data on each living alumnus and guard that information zealously. MNB tapped into this potential market by contracting with universities to have access to the alumni database in exchange for a percentage of credit card charges made by cardholders. The idea was an instant success. Most alumni favor their alma maters and the credit card offer stated two things: the university gets a percentage of their purchases and the credit terms are identical with other cards. So, at no cost, an alumnus could contribute something to the old school. There was one other element: pre-approval. Since college graduates are highly credit worthy, MNB decided to grant pre-approved accounts to alumni on the list.

University after university lined up to sign up. College graduates around the world received offers of pre-approved credit cards bearing a picture of their university or its mascot along with the information that using the card contributes money directly to the campus. The success of the program aided numerous colleges and universities and made MNB very profitable.

One unintended consequence was the actions of competitors. Soon, pre-approved credit cards were sent to too many people. Some got multiple cards per month. In this age of phishing and fraud, consumers are warned to be wary of losing control of their credit information. Unsolicited credit cards convey consumer vulnerability. If one is stolen or misdirected, a criminal could sign his or her name, activate the card, and use it to make unauthorized purchases. In many cases the unsuspecting cardholder does not learn of the crime until the company sends a bill or threatens legal action for non-payment. Thus consumer advocates stress that individuals should have a limited number of credit cards, should manage them carefully, and should restrict unsolicited offers that are vulnerable to criminals.

How does a consumer protect against pre-approved credit cards or unwanted marketing solicitations? A web site may help.

Web site to stop direct marketing efforts[www.optoutprescreen.com]

The OptOutPrescreen.com web site is the official Consumer Credit Reporting Industry web site to accept and process requests from consumers who wish to Opt-In or Opt-Out of offers of credit or insurance by firms. The credit reporting industry in the US essentially consists of four large providers, Equifax, experían, Innovis and TransUnion. As an industry, the companies maintain a web site to aid consumers in their dealings with unsolicited pre-approved credit offers. The site states that its members “encourage consumers to make informed choices about receiving firm (preapproved/prescreened) offers of credit or insurance.”

The text strives to balance the benefits and costs connected with such offers, and emphasizes the benefits. They include the value of having product choices, and the opportunity to take advantage of offers that may not be available to the general public. In addition, prescreened offers may help consumers to “comparison shop” with the effect of increasing a consumer’s buying power. In addition, the site’s opening page contains a link to a 56-page Adobe Acrobat format document titled, “Report to the Congress on further restrictions on unsolicited written offers of credit or insurance.” The document is a 2004 report to the US Congress on the issue and is used as a third-party, government document with some support for the practice. The web site directs visitors to look at pages 32-40, “Benefits of receiving written offers of credit or insurance.”

That information appears on the left side of the screen and presents the positive side of the story. The right side of the screen presents information describing the Fair Credit Reporting Act (FCRA) and its effects. It states that the consumer credit reporting companies are permitted to include a consumer’s name on lists used by creditors or insurers to make firm offers of credit or insurance. It goes on to state that the FCRA also provides consumers the right to “Opt-Out”, which prevents consumer credit reporting companies from providing credit file information for firm offers of credit or insurance that are not initiated by the consumer.

The site clearly describes the choices it presents. They include three options:

Opt-Out from receiving firm offers for 5 years;Opt-Out from receiving firm offers permanently; andOpt-In and begin receiving firm offers. This option is for consumers who have previously completed a request to Opt-Out.

The site repeats the mantra of the benefits of prescreened offers of credit and insurance in its directions: “If you choose to Opt-Out, you will no longer be included in firm offer lists provided by these four consumer credit reporting companies. If you are not receiving firm offers because you have previously completed a request to Opt-Out, you can request to Opt-In. In doing so, you will soon be among the many consumers who can significantly benefit from having ready access to product information on credit and insurance products that may not be available to the general public.”

Choosing one of the options requires submitting personal information including:

• •

  name;

• •

  address;

• •

  Social Security number; and

• •

  date of birth.

The site states that the Social Security number and date of birth are not required to process the request but are helpful to ensure success. It goes on to describe the web site’s security protocols that protect personal information from unauthorized access or alteration.

In summary

Overall the web site is engineered to persuade visitors that unsolicited offers have benefits. After reading the material, interested consumers may desire to sign up for the offers by clicking on the opt-in button. While clearly a pro-offer site, it does allow visitors to opt out of the offers at the click of a mouse. Still, hedging toward the industry, it supplies two opt-out choices: five years or forever. Nevertheless, the web site provides protection for the consumer. Coincidently, it protects the industry from further legislative intervention by demonstrating self-regulation.

Reader requests

Please forward all requests to review innovative internet sites to: Dr Dennis Pitta, University of Baltimore, 1420 North Charles Street, Baltimore, MD 21201-5779, USA. Alternatively, please send e-mail to: dpitta@ubalt.edu for prompt attention.

Edited by Dennis A. PittaUniversity of Baltimore