The Credit Card Game (full documentary) | FRONTLINE

Frontline investigates the 30-year history of the American credit card industry, highlighting the tactics used by banks to maximize profits, such as changing terms, raising interest rates, and introducing new rules. The report emphasizes the significant profits generated, the trillion-dollar debt it has created, and the role of the credit card industry in contributing to the economic meltdown. The narrative focuses on how consumers, often unable to pay off their debts, were enticed to refinance their homes to pay off credit cards, only to accumulate debt again. The government's involvement in regulating the industry is also discussed, with a spotlight on Providian Financial and its former CEO, Shailesh Mehta, who is interviewed about the company's controversial practices.

Providian Financial, once a profitable credit card company, is credited with changing the credit card business model. The company targeted 'un-banked' individuals, including those with low income, bad credit, or no credit history, offering them credit cards. This strategy led to significant profits but also to criticism for exploiting customers. The company's practices, such as penalty pricing and increasing fees to make up for waived annual fees, became industry standards. The segment also discusses the impact of these practices on consumers, like Elizabeth Blascruz, who faced escalating fees and interest rates, leading to insurmountable debt.

The script discusses the collapse of the stock market and the subsequent economic crisis, linking it to the collapse of the consumer lending bubble. It highlights how consumers, burdened with credit card debt, refinanced their homes to pay off their credit cards, only to accumulate more debt. This cycle contributed to the sub-prime mortgage crisis and the foreclosure wave. The segment also touches on the lack of effective regulation in the credit card industry, which allowed for unfettered fee and interest rate increases, and the role of the political climate in enabling this deregulation.

The segment details the challenges in achieving credit card reform due to the lobbying power of the banking industry. It includes interviews with Senator Richard Shelby and Senator Christopher Dodd, who discuss the difficulty of passing legislation against the industry's interests. The influence of campaign contributions from the financial sector on political decision-making is also examined. Despite public demand for change and the Obama Administration's support for reform, the segment highlights the compromises made in the final legislation, which did not go as far as some had hoped in protecting consumers.

The segment discusses the passage of the Credit Card Act, which made it more difficult for companies to change interest rates abruptly. However, it also points out the limitations of the Act, such as the lack of regulation over interest rates and the eight-month gap before the law's implementation, which allowed banks to impose higher rates and fees. The banks' response to the Act, including reducing credit lines and increasing fees, is also covered. The narrative emphasizes the ongoing struggle for consumer protection and the need for a more comprehensive regulatory approach.

The script explores the shift from credit cards to debit cards, which were not regulated by the new legislation. It discusses the growth of debit card usage and the associated fees, particularly overdraft fees. The practice of allowing customers to overdraw their accounts, initiated by banking consultant Bill Strunk, is highlighted, along with the high fees that customers can incur for such overdrafts. The segment also covers the debate over whether banks should deny transactions at the point-of-sale to prevent overdrafts and the potential for banks to manipulate transaction processing to increase fees.

The segment examines the payday lending industry, which offers short-term loans with high interest rates. It includes an interview with a payday lender who defends the industry's practices and argues that they provide a necessary service for consumers who need quick access to cash. Critics, however, argue that these loans trap people in a cycle of debt. The segment also discusses the regulatory environment for payday loans, noting that they are not regulated at the federal level but are banned in some states due to their exorbitant fees.

The segment discusses the proposal for a new regulatory agency to oversee consumer financial products, including credit and debit cards, mortgages, and payday loans. It highlights the debate over the agency's potential impact on the banking industry, with some arguing that it could stifle the free market and others contending that it is necessary to protect consumers. The segment also touches on the opposition from banking regulators and the potential benefits of having a centralized agency focused on consumer financial well-being.

The script concludes with a discussion on the future of consumer credit in America, noting that it has become more difficult to obtain loans and credit cards. It includes perspectives from industry insiders and experts who debate the need for less debt in the system and the potential impact of capping interest rates. The segment also addresses the Obama administration's stance on not capping interest rates and the potential for banks to continue finding ways to increase their profitability through fees.