You know there’s the smell of money in the water when the credit card companies start circling.
That’s exactly what I saw when I strolled by the BillFloat booth at yesterday’s Finovate. People from both Visa and Discover were talking to the BillFloat team, and I completely understand why. BillFloat offers short-term, small-balance credit to consumers so they can pay their bills. That’s what the credit companies do as well.
One question mark regarding BillFloat is the credit performance in its portfolio. But Robin O’Connell, vice president of business development at BillFloat, said the default rate is running about 10% on first-time borrowers, and 5% on repeat borrowers. That appear to me to be good performance considering the portfolio.
And they only charge 36% interest! Plus a fee.
SMELL is the operative word.
The credit card companies may be concerned that the risk based pricing justification of BillFloat will destroy their own arguments for the outrageous pricing that the credit card companies are still charging on portfolios with expectations for loss that should be even better than BillFloat.
And if they are now underwriting to build portfolios similar to BillFloat, someone needs to wake up the regulators. Can they get a regulator to state that this is now a prudent banking practice?
Someone in credit card administration needs a wake up call that the days of “abusing the public” are over.
They simply need to answer the question “Will the bank provide a certified financial counselor that will state in writing that it is good for their customers to be paying abusive rates”?