By AnnaMaria Andriotis
When Curtis Arnold launched the card-comparison website
BestPrepaidDebitCards.com in early 2013, American Express Co.
signed on as an early advertiser.
Soon after, Mr. Arnold said, the company asked him to refer to
its widely used Bluebird card not as a prepaid card but as a
"checking and debit alternative." Mr. Arnold agreed. Then, last
summer, American Express executives urged the site to change how it
presented the card's fees, he says.
While American Express publicly states the card can carry low
fees depending on how it is used, Mr. Arnold's site said it would
cost some cardholders $96 a year depending on how they use the
card. The site estimated costs for cardholders who did not have a
direct deposit arrangement on their card and who made four
withdrawals from automated teller machines each month. Following
the call, the site changed its methodology and quoted lower
estimated costs for all prepaid cards it shows.
"We cracked," said Mr. Arnold. "I'd be lying to say their input
didn't play a role. If we're consumer-driven, we shouldn't be
yielding to any advertiser demands."
An American Express spokeswoman said the company spoke with the
site "to point out factual inaccuracies and explain that Bluebird
is not a basic pre-paid card."
Over the past year, the mutually beneficial relationship between
a number of card issuers and comparison sites has turned icy, with
heated conversations between the parties, banks cutting off ties
with some sites and, in one case, a lawsuit.
Interviews with a dozen card-comparison sites reveal that as
card-issuer pressure ramps up--with increased requests for sites to
delete or change some information--most sites are giving in to
their demands.
At stake for consumers is potentially misleading and less
complete information. Consumers consult credit- and prepaid-card
comparison websites to find the cards with the lowest fees and the
best rewards programs. Instead, they're increasingly seeing the
fees lenders want the sites to show rather than the fees they're
likely to incur. And as lenders cut off ties, some no longer want
their cards shown on these sites at all.
Lenders say they're taking these steps largely out of concern
that regulators will sanction them if their card information on any
of these sites is found to be inaccurate, unclear or in any way
misleading to consumers. Regulators have recently taken more steps
to address this issue.
Lenders say the Consumer Financial Protection Bureau has
expressed concern about the banks' relationships with the
third-party credit-card sites. "The Bureau is aware of these
websites and will continue to look closely at how credit cards are
marketed [on these sites] to monitor for consumer harm," said a
CFPB spokeswoman.
Separately, the Office of the Comptroller of the Currency, an
independent bureau within the U.S. Treasury Department, released
guidelines last fall requiring banks to take extra efforts to
manage risks associated with any third-party relationships, in part
by monitoring the third party's activities and having plans in
place to terminate such relationships if needed.
While the guidance doesn't mention credit-card comparison sites,
"what we're seeing in the last year is heightened scrutiny of a
bank's relationship with any third party," said Nessa Feddis,
senior vice president of consumer protection and payments at the
American Bankers Association.
These sites are beholden to the card issuers for revenue. At
least six of the 19 most well-known sites show credit cards only
from lenders. Another six show mostly advertiser cards, and those
credit cards receive preferential treatment, often showing up first
on searches or in editors' best picks. Some of these sites also
provide additional services beyond credit-card comparison tools,
such as bank account comparison options and credit-monitoring
tools. Some sites receive a small portion of their ad revenue from
banner ads from lenders and nonlenders. The sites don't charge
consumers for their card-comparison services.
Many sites declined to comment on the record for this article,
saying that they have signed agreements with the lender partners
not to discuss their relationships. They say, however, that they
give in to lender demands largely out of fear of losing revenue and
shutting down.
"It's up to the issuers to tell us what the terms are," said
Joseph Mognon, head of business development at CreditSesame.com, a
credit-management site that also features a credit-card comparison
service. All of the cards the site features are from lenders who
advertise.
With a few exceptions, the card-comparison sites get paid only
if consumers start the card application process on the site and the
lender approves them for a card. Some also get paid for clicks.
Fine print or disclosure documents on the sites describe this
relationship, though many consumers don't notice this, said Linda
Sherry, a director at the nonprofit Consumer Action, which has
studied credit-card comparison sites. Numerous sites state that the
offers that appear on the site are from companies that pay the
site. In many cases, this disclosure is in fine print at the bottom
of the site.
"It's completely murky to the consumer," she said.
CardRatings.com, a site Mr. Arnold founded in 1998 and then sold
in 2010 to QuinStreet, a direct-marketing firm in Foster City,
Calif., has been speaking with Capital One Financial Corp. on
another disclosure issue. The company, a major subprime credit-card
lender, insists that its cards not be listed in categories for
borrowers with bad credit, Mr. Arnold said.
In response, CardRatings.com shows such consumers only Capital
One's secured cards, which require cardholders to put a deposit
down, he says.
Capital One is among the site's advertisers, though only about
11% of the cards listed on the site are from paying lenders.
A Capital One spokeswoman said all of its regular credit cards
are for consumers with average credit and above. She said the bank
has a broad definition for average credit that includes borrowers
who have defaulted on loans in the last five years and also has a
regular credit card for borrowers with limited credit history--but
that the bank doesn't categorize them as borrowers with poor or low
credit. She says the bank wants to avoid situations where consumers
think they have a realistic shot at getting a card when in reality
they are likely to be declined.
At his prepaid-card site, where Mr. Arnold adjusted his
estimated-cost numbers, American Express nonetheless removed its
ads in the fall.
The spokeswoman for American Express said the company recently
conducted an analysis of its relationships with card-comparison
sites and decided to significantly reduce the number of sites it
works with. She added, "We don't think it is appropriate for sites
to award 'best' rankings in return for advertising payments or
provide assessments of products without letting consumers know
about the relationship between these sites and their advertisers
that issue them."
A spokesman for Discover Financial Services Inc. says the
company has taken a more strategic approach to card-listing sites
and is becoming more selective with where it advertises.
The most aggressive steps have been taken by a lesser-known
subprime lender, First Premier Bank, which is based in Sioux Falls,
S.D. It charges a 36% annual percentage rate, among the highest in
the industry, plus a $95 processing fee to open up the card and a
$75 annual fee for the first year. The lender's card has slowly
disappeared from many popular comparison sites over the past few
years after First Premier terminated advertisements and required
some sites to remove the card information after that.
The few large websites where First Premier remains an
advertiser--including CreditCards.com and Credit.com--no longer
show its interest rate or its annual fee. CreditCards.com and
Credit.com said they accepted First Premier's decision not to show
its terms. "We didn't push it--we usually do and we didn't in this
case, and I don't know why, " said Ian Cohen, chief executive of
Credit.com.
Repercussions can be severe when a site tries to push back
against lender demands.
First Premier filed a lawsuit earlier this year against
CardHub.com parent Evolution Finance Inc. and its chief executive,
alleging trademark infringement for displaying the bank's name and
linking to its website. The suit calls for all First Premier
content to be taken down. The lender also filed a motion for a
preliminary injunction with the same request.
CardHub.com and its partner site WalletHub.com are among the few
websites without an advertising relationship with First Premier
that display its interest rate and fees. Of the more than 1,200
credit cards that CardHub lists, fewer than 10% are from
advertisers.
Talks to settle the case failed this month, and Evolution
Finance filed a motion to dismiss the suit, citing First Amendment
protection, said Deepak Gupta, the lead attorney representing
Evolution Finance. The lender has until Aug. 28 to respond.
Consumers with low credit scores, who have few credit-card options,
should be able to see the card alongside the other credit cards
that may be available to them, said Odysseas Papadimitriou,
CardHub's CEO.
Darrin Graham, a vice president at Premier Bankcard, the
credit-card marketing and servicing division of First Premier Bank,
said the issuer is no longer asking Evolution Finance to remove its
card information from its site. Instead, it is calling on the
company to remove the link that allows consumers to start the
application process because it is concerned that suggests to
consumers that the bank and the site are still partners. While the
lawsuit hasn't changed thus far, First Premier filed paperwork on
Thursday night clarifying language in the preliminary injunction
stating this.
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Mr. Graham said the bank intends to control how its credit-card
information is displayed on the sites that it works with. It no
longer provides the interest rate or fees for the card largely
because its fee structure is different from other cards and can't
appropriately be compared with them, he said.
"The whole part about having control is not something I would
apologize for," Mr. Graham said. "Our whole intent is to try to
eliminate any consumer confusion out there...because it's a
high-cost card we don't want to mislead them [and] we don't feel
they will get a fair representation of it the way it's set up on
these websites."
Card-site officials question the timing of banks' decisions to
remove or change their information on these sites, saying that
lenders often take these actions after a negative review of one of
their cards has been posted. For instance, Mr. Arnold sees
"peculiar timing" in when First Premier ended its relationship with
CardRatings.com. He said this occurred shortly after it listed the
First Premier card in the site's annual "Hall of Shame" feature
that displays the cards with the worst terms. Mr. Graham of First
Premier says ending the partnership had nothing to do with this
feature.
Write to AnnaMaria Andriotis at AnnaMaria.Andriotis@wsj.com
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