Like Payday Loan Lenders, Do Credit Card Companies Target Struggling Clients?

Historical archive, first published 2006 — payday-lending laws and rates have changed since. Preserved for the record.

It's an issue that the Federal Reserve grew tired hearing about: Like many online payday loan companies, do credit card issuers actually target those already in debt?  

As a result, the Fed issued a report downplaying assertions that the banking industry contributed to bankruptcies through such a practice. In the release, it was concluded that credit card issuers do not follow the lead of faxless payday loan lenders; they aren't soliciting customers or extending credit to them without assessing their ability to repay debt.

Congress requested the report as part of a 2005 bankruptcy law.   

''Despite the large expansion in the proportion of households with credit cards in recent decades, measures of debt repayments relative to income show no signs of a rise in distress in the aggregate,'' the report stated.   

In its review, the Fed was asked to assess whether industry practices encourage consumers to accumulate debt, how issuers determine whether a consumer will repay the debt, and how they solicit and select customers. Maybe a similar look into the world of faxless online payday loans would be a good idea.