For all the encomia made by banking industry lobbyists to the value of the “free flow of information,” one finds examples where the industry restricts information sharing when it benefits them.
Capital One was one of the worst offenders. It’s complex, but the company was restricting information flow in such a way that it lowered cardholders’ credit scores. How? Capital One reported cardholders’ balances, not their credit limit. This practice makes a cardholder appear to have maxed out their credit card. Why? Because if your credit score is lower, it will be harder to get other credit cards. It’s an anticompetitive tactic.
Kenneth R. Harney of the Washington Post explains the problem very clearly, and reports that Capital One has finally ended this practice. And they blamed it on privacy:
Over the years, Capital One has brushed off criticism that it was needlessly harming its customers by withholding their account limits from the credit bureaus. Equally bad, said some consumer groups, Capital One never disclosed the practice to its customers. Although industry critics said Capital One’s purpose was to hide its good customers from competitors searching credit-bureau files for attractive FICO scores, the company said it was protecting customers’ privacy.
If you have a Capital One card, consider canceling it in light of this terrible behavior. Need a new credit card? Be sure to use Consumer Action’s 2007 Credit Card Survey to find the best card with the lowest fees and rates.