The news broke last week that the Bank of America has decided to offer people without social security numbers and credit history Visa cards.
OK, who, exactly, in this country doesn’t have a social security number AND a credit history.
Folks, I am NOT being a racist when I point out that most of the people who fit into that group happened to be in this country illegally.
The BofA says that they’ll only issue such a credit card if that person has a checking account for three months without an overdraft.
Don’t you need a social security number to open a checking account?
The boys from Charlotte – probably a bunch of Duke and UNC finance graduates – see this as serving a market. Of course these are also the same people who issue credit cards to people like me and refuse to renew them when they are actually used regardless of payment history.
Apparently, you can make more money from people who only have one option than people who have lots of options.
What amazes me is the timing.
The business media is rife with stories of the "sub-prime" housing market falling apart.
What is the "sub-prime" housing market?
That consists of big banks and other lenders who make loans to people who really can’t qualify for them on the basis of teaser interest rates and the assumption that the first payment people will make will be on their houses.
That, by the way, is true if somebody actually has something to lose.
But people with no equity in their houses and not enough income to cover their new and improved payments are walking away from their overpriced houses in droves.
Who made those loans?
Indirectly, the Bank of America. Here’s how it works.
Other companies actually make the loans. After they make the loans, they sell them to investors. But it usually takes some time to do that. So the Bank of America acts as a "warehouse" to hold the loan until it is sold to an investor. If the Bank of America didn’t keep warehousing the loans, the sub prime lenders wouldn’t have any cash. But you won’t see much about that in the Bank’s annual report.
These credit cards the bank of now issuing are nothing more or less than subprime credit cards.
Only nobody—especially people with no social security number or credit history—has any incentive to pay a credit card bill if they get into trouble.
And then there’s the homeland security issue.
Banks are very strongly regulated in this area. They are required to know their customers.
How well can you know a customer without a social security number or a credit history.?
In fact, here’s a bit of this bank’s track record in that area:
This comes from the Inner City Press Fair Finance Watch which, admittedly, has a point of view but, nonetheless, facts are facts:
October 2, 2006: Bank of America admitted last week that its lax operations allowed South American money launderers to illegally move $3 billion through a single Midtown Manhattan branch. BofA said that it ‘’takes seriously its anti-money laundering obligations’’ and that it ‘’never knowingly does business with persons, organizations or businesses engaged in illegal activities and did not in this case.’’ Most of the funds came from Brazil via a licensed money transmitter in Uruguay and then to the Bank of America branch, which allowed funds to reach unlicensed money transfer firms in the area...
It’s possible that the Bank of America may have to learn another very expensive lesson.
If they were smart, they would ask Citgo how it feels to be owned by Venezuela about now.