Credit cards are usually regarded as a convenience but can also be the source of many headaches for both customers and financial institutions.
Bank of America (NYSE:BAC) discontinued selling its credit protection service to new credit card customers. This happened in the wake of a $20 million settlement of a class-action lawsuit against BAC awaiting final approval and alleging the bank marketed its debt protection product in a misleading way and enrolled customers without their approval.
Credit protection services and products generally allow credit card holders to suspend (against a monthly fee) their minimal monthly payments under unusual circumstances ranging from a leave of absence to a death in the family. BAC will continue offering this service to its current subscribers but will not be offering it when issuing new credit cards.
It’s only natural for bank officials to present the whole story as a planned move or even as part of a larger-scale strategy to streamline its operations and discontinue or sell non-essential branches and assets.
BAC would not reveal the revenue such services generate but the Government Accountability Office reported that payment protection products cost customers a cumulative of $2.4 billions in 2009 alone. With Bank of America being the second-biggest credit card issuer in terms of outstanding loan balances, one can only wonder how non-essential exactly their income from the service was.
BAC share price is climbing slowly, together with virtually the whole financial stock sector, on hopeful news from Europe and a light in the tunnel of Greek debt. BAC stock has climbed almost $0.5 in the last week, closing at $8.19 yesterday.
U.S. financial stocks remain largely in the grip of European anxiety. The fact that even the hint of good news is able to affect the markets positively means there probably will be much bigger moves as soon as there is some closure on the debt crisis.
