By David Oppenheim
Chicago, IL, USA
Contracts. Agreements. Deals. Whatever the name, these words communicate a simple concept: two people make an arrangement where each promises to do something for the other. Whether you’re talking about buying groceries, bartering at an Old West trading post, or merging corporations, every transaction involves each party promising to give something of value to the other and to be bound by the terms of that deal.
Too often over the past twenty years, the art of the deal with consumers for health insurance or credit cards is the art of the corporation extracting essentially permanent promises and iron-clad obligations from the consumer, while permitting themselves the ability to back out of the deal or change the terms at will, thereby leaving the consumer out on a limb.
Just look at how the health care insurance industry has played this game. Insuring one’s health should be straightforward: the policyholder pays premiums to the insurer; and, the insurer pays the policyholder’s medical expenses when incurred. In the United States, however, seven large corporate insurers collect billions of dollars in premiums from individuals and businesses, skim up to 30 cents of every dollar for themselves as “corporate profits,” while paying huge executive salaries and legions of underwriters, claims managers and lawyers to create ways of avoiding policyholders’ claims.
The insurance industry has armed itself with powerful tools to defeat the policy holder, including: the pre-existing condition exclusions—where insurers refuse to honor their end of the bargain for pre-existing medical issues; “fraud” investigations—where teams of corporate employees respond to an insured’s claim by poring over the insured’s medical history in an attempt to find anything, however small or unrelated (such as not disclosing acne), and using that as grounds to cancel a policy to avoid paying a claim for a cancer treatment; and rescission—where the company decides to unilaterally cancel an insured’s policy even where they cannot find “fraud” because that insured’s treatment is too expensive.
The credit card industry is no different. It is the near-monopoly of a few huge, rich and often unethical companies. They, too, are supposed to play a vital role for consumers in our society by providing a source of money in exchange for payments in the form of interest. In times of physical illness, health insurers have perfected the art of being unreliable; in times of financial distress, credit card companies have invented their own self-serving arsenal of escape tactics that often terrorize and torture their very own customers. As Mark Twain once said, “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain."
Much reporting has been done in recent days that credit card company profits are threatened by the weak economy. Of course, it should be said over and over that many of these companies helped to create our weak economy by engaging in extremely risky financial speculations and then forcing the Federal government to bail out their losses all the while making it nearly impossible for many consumers to pay their mortgages. This, of course, led to mass foreclosures and the housing market crash, and now these companies are brazenly and unilaterally taking away consumers’ lines of credit and further destroying the consumers’ ability to pay their bills. In some cases, companies close accounts outright even though the consumer is current and up to date. As the Wall Street Journal reported, this can be done without even informing the consumer until after the account has been permanently terminated. In many more cases, the companies unilaterally reduce consumers’ credit lines and alter the terms of the deal via tissue paper mailings. The overall impact on consumers is serious, painful and lasting as their credit scores take huge hits. And the law lets these companies get away with it. Meanwhile, if consumers cannot pay the ever-rising interest rates, the law allows them little quarter. Bankruptcy, repossession of property, and friends and neighbors talking in hushed tones becomes the new norm.
The question that must be asked is: If corporations can change the terms of deals at their whim when their bottom lines dictate, why can’t consumers? A deal should be a deal. The credit card companies ought to be stuck with the terms offered and accepted by the consumers initially, with any changes having to be mutually agreed upon. And if the companies want out of a deal, they can only do so if they get all the way out—by forgiving any debts the consumer may owe in exchange for closing the account. A deal should be a deal.
The health insurance companies have proven themselves incapable or unwilling time and again to live up to their end of the bargain in the vital arena of physical health. As a result, they are in the legislative crosshairs as we speak. The credit card companies have proven themselves incapable or unwilling to live up to their end of the bargain in the vital arena of financial and economic health and they ought to be the next ones with targets on their backs.
Just as we cannot let the health insurance companies derail meaningful reforms, we cannot allow credit card companies to do so either. Like health insurers, credit card companies’ profits are blood money built on human misery and suffering. They have no justification for their actions or their “rules are for you but not for me” attitude. It’s time the American people let credit card companies and Washington know that a deal should be a deal and not a license to deceive.
David Oppenheim is a licensed attorney in Illinois. He graduated from Yale University in 1999 and Harvard Law School in 2002. He is married, with two children.