Read my testimony for today's Maryland bill hearing

As I mentioned yesterday, I am in Maryland to testify for a bill that will prohibit blacklisting in Maryland.  During my stay in the Washington, D.C. area, I will also meet with federal government agencies and trade organizations that are working hard to increase regulation for credit card companies. 

A young Maryland delegate, Saqib Ali, invited me to testify in support of his bill and represent customers affected by blacklisting.  He boldly proposed legislation in February that will stop the discriminatory data-mining practices by companies like American Express in Maryland. He is the first person in the country to propose this much needed legislation.  My hope is that the bill will pass and set an example for the rest of the country.  Moreover, I hope it will gain the attention of the federal government to pass  similar legislation.  

You can read the text of my testimony below. I will have video of the hearing soon.

Chairman Davis, Vice Chairman Rudolph, and Members of the Committee:

I greatly appreciate the opportunity to offer comments on the harmful effects of discriminatory data-mining behaviors, a dangerous practice akin to credit card redlining.  Likewise, I am thankful for the opportunity to publicly and expressly support House Bill 1292 Consumer Protection – Blacklist Prevention.

I am Kevin Johnson, a 29-year-old small business owner of ten years.  Although I have roots in Baltimore, Maryland, I live in Atlanta, Georgia, a city that has a proud and rich heritage of successfully fighting injustice and like we are doing today, challenging companies that engaged in discriminatory practices.  I have flown in today at my own cost just to have the opportunity to speak before you today. 

I am a customer of American Express and have been since 2005.  Since then, all my accounts have been in good standing, meaning I have never been late or given American Express any delinquent reason to make adverse changes to my accounts.  It is also important to mention—because of universal default—that I have been equally responsible with all my other lenders.  During the time I have had an account with American Express, my credit score has increased from a 707 to a 764. 

In October of last year, I received a letter from American Express informing me of a credit line reduction of $7,000, almost 65%. When I read the following reason given, in part, for the reduction, I was appalled.  The letter read: “Other customers who have used their card at establishments where you recently shopped have a poor repayment history with American Express.”  No where in my contract or terms with American Express was it disclosed that the delinquent actions of others would have a direct bearing on my credit worthiness.  Had I known this was the case, I certainly would have patronized another more ethical business.  

As an immediate result of American Express’ ill-considered actions, my credit score dropped tremendously.  Because of the drop, I had to explain to my beautiful wife of five-months that I no longer qualify for the best interest rates; that this demotion will cost us approximately $15,000 more for a 30-year fixed-rate mortgage on our first home together.  Also, I now have to scrutinize the stores where I have used my American Express card such as Walmart, Starbucks, Chateau Elan Winery, The US Post Office, and a Maryland favorite, Five Guys, all establishments that are not the least bit suspicious or indicative of fiscal irresponsibility. Perhaps the only thing I am guilty of is poor taste, but that certainly isn’t justification for denial of credit. 

I immediately and politely contacted American Express by letter and by phone for an explanation of its policy, but to no avail.  Customer service representatives from the executive’s office dodged even the most basic questions such as:  What does this statement mean? Will you name the bad establishments to which you are referring?  In fact, one customer service representative’s voice quivered with suspicion and self-incrimination as she repeatedly said, as if reading from a script, that the statement was a mistake and that American Express weighs other factors more heavily.  The company’s answers were not consistent and did not make sense at all.  

Because of tremendous criticism from the media, American Express admitted that it, in fact, did use spending habits to assess a customer’s credit worthiness.  In an Oct. article published by MSNBC, Spokeswoman Kimberly Forde said American Express would not divulge any of the "establishments" where a cardholder’s shopping might trigger a review. She also said that it is “one of the many factors in our property risk model, and it actually changes frequently.”

Likewise, in a Jan. New York Times article, American Express admitted its treacherous policy of looking at “spending patterns” but announced its intention—and I stress intention—to change it.  Spokeswoman Susan Korchak says in direct response to my situation, “The letters were wrong to imply we were looking at specific merchants.” It is important to note that her statement completely contradicts the other spokesperson’s comments.

What caused the change in heart you might ask?  The answer: a $114 million settlement won in Nov. by the Federal Trade Commission against CompuCredit, another credit card company that was doing the same thing as American Express. 

While I would love to present to you all of the legal arguments that support this bill, those efforts would be redundant.  The work has already been done.  But the work is not complete.  Where the federal government has failed to implement appropriate regulation to prevent these insidious practices, you can be successful. 

We cannot hope that a relatively small settlement from a law suit will deter banks from engaging in these practices.  We cannot take the banks’ word that they intend to change their internal policies anymore than we can expect TARP recipients not to carelessly buy new private jets or expensive trash bins with tax payer money.  We cannot believe a company, like American Express, that after 145 days, five months, has yet to restore my credit line and to apologize to me and others for being misleading about their policy. 

In conclusion, this is not only an indictment of American Express, but also of other companies that engage in blacklisting without customers’ knowledge, and in so doing, limit worthy customers access to credit.  This bill has the power to protect Maryland consumers by sending a strong, clear, and legal deterrent that will stop blacklisting, and therefore set the model for the rest of the nation.  It is my hope that you will pass this much needed bill, which calls for more transparency in an industry that in the name of increased profits and enhanced risk management has resorted to deception of the worst kind.

Thank you.      

Comments

[Kevin D. Johnson]

Corrected.

[Delegate Saqib Ali]

Misspelled my name there....

[Sharon Barlow]

Kevin, again thank you for all your efforts. I echo Heidi and say also that you are my hero. I'm amazed how injurious credit card companies just because they want to AND CAN. This not only hurts individuals but the economy as well. I'm afraid to spend money and "stimulate the economy" out of fear of what will happen next in required payment amounts on the debt I have now. And I'm talking about paying cash not adding more debt.

I think of CC companies as like the person shooting fish in a barrel. I know that's a ridiculous image but the companies are doing major damage in an unnecessary way.

[Laura B.]

Bob, your first comment is so off base. And some of your other comments are too, but I'll stick to this one first.

To imply that Kevin is looking for discrimination reflects on your impaired perception.

Discrimination at its core is not exclusively based on race although it can be. When you see a black person fighting for discrimination, it doesn't automatically mean the issue is race related.

If you read Kevin's, blog, you would know that he is one of two people to speak out about this. The first person was white, and Kevin has said that as far as he knows, the majority of those affected by this are white people. He would know because they have e-mailed him.

Bob, think before you speak. Here is the definition of discrimination below so you can educate yourself. The main problem is that AmEx didn't judge Kevin's credit worthiness on his merit, but the merit of others, which is clearly described in the definition.

dis⋅crim⋅i⋅na⋅tion [di-skrim-uh-ney-shuhn] –noun
1. an act or instance of discriminating.
2. treatment or consideration of, or making a distinction in favor of or against, a person or thing based on the group, class, or category to which that person or thing belongs rather than on individual merit: racial and religious intolerance and discrimination.

[Bob]

I really do not think what they did was discriminatory. But then, I am not LOOKING for discrimination as I suspect you are. (Funny what one might find if they really, really want to see it)

I had something similar happen to me with Citi.

I had some kind of rewards card that I think they changed the deal on a few years ago so I quit using it. (I vote with my feet)

A week or so ago I got a letter lowering my already low credit limit from $10,000 to $100. (Yes, one hundred !)

I called a bit perturbed because I believe it actually hurt my credit score by 4 points. I went from 770 to 766. (Thats not the real fico but CreditKarma) and the reason they gave me is "lack of usage".

Anyway,I realize that Citi is in big trouble and they I personally dont believe companies should have to loan money when its not in their best interests so I kind of understood despite the 4 point "hit" to my score.

Frankly, I think companies can probably actually help their loss ratios by paying attention to customers buying habits.

What if I made charges at bars and liquer stores nearly every day over a month or so. In my opinion, that is irresponsible behavior that could bring into question my future ability to pay my bill. (Particularly if I had a large balance outstanding)

So, while I would not like it, I could understand it.

I did find out from Citi that apparently the reason they didnt close it was I had $86 in rewards that I had totally forgotten about. I had them send me the check. I cant understand why I had so much unless they had a target where I would have gotten bonus money or something that I forgot about.

A funny story about Amex. When i was young, I alwasys wanted an american express gold card for the symbol. I got one and never, ever used it. But it was my first gold card I believe. And I probably used inflated income figures to get the card.
I guess that is legally bank fraud, but I never even used the card, Probably cancelled it a few years later after carrying it in my wallet for show.

Either that or they wanted to impose a fee that I wouldnt pay.

Indeed, maybe I canceled right after I got it but kept the card in my wallet to show off. I guess I was maybe 21 and not many kids that age had an Amex Gold !

[Heidi]

you are my hero kevin. i look forward to hearing the details of how the hearing went soon. i especially want to hear what american express had to say for themselves. i bet many of the people there had amex in their wallet and were shocked to hear about what is going on. keep speaking up for consumers.