JJ Astor on Business
Winning in the future, with a nod to the past.

It Pays To Discover – (and write about) regulatory issues

Last week, I was headed out the door to the beach when I received a call from a restricted number on my cell phone. “Hello, this is David Nelms from Discover Financial,” the voice said. With a million things on my mind, I figured that it was in response to a recent customer service call. But, as the name started sounding more and more familiar in my mind, and the conversation quickly got to the point, I realized that I had David Nelms, the CEO of Discover Financial, on my cell phone. His primary motivation for calling me will be explained in a moment, but he also took the time to ask me about how my businesses were doing, and gave me a direct line to his administrative assistant should I ever need to get in touch with him again for any reason (he also thanked me for being a loyal customer).

Step back a day earlier, and I’m reading an article about Regulation AA R-1314, an initiative by the Federal Reserve Board misleadingly called the “Unfair or Deceptive Acts or Practices” Act aimed at limited the information a credit card company can use to price the risk on your credit accounts. Since I’ve been a long time follower of the credit card industry, and have even penned the first half of a book on consumer credit, I was infuriated by the Fed’s short-sightedness in such a proposal. But there was one opportunity – the Fed Reserve Board of Governors was looking for feedback from citizens.

As I crafted my email to the Board of Governors, and prepared to send it, an idea crossed my mind. Since I had already written the email, why not BCC all the top executives of every major credit card company whose email address I could get my hands on? Well, with about 30 mins work and a little creative thinking, that turned out to be almost all of them (top three from every major credit card company – aside from Bank of America, which barely qualifies as a company and whose executives barely qualify as businesspeople).

It also got me thinking that I should continue to use this strategy to get in touch with other executives in other industries – write to my lawmakers opposing regulation and BCC applicable industry execs. As mentioned above, my plan worked, and today I received a typed letter from the office of Richard Fairbank, CEO of Capital One Financial, as well as the surprising call I received from David Nelms of Discover last week. I think this is a strategy to save for future playbooks.

By the way – I really am passionately opposed to Regulation AA R-1314, and here is an excerpt from my email (read reg aa here and send feedback to federal reserve here):

“……Regulation AA will increase the credit card companies cost of doing business with me, because it will limit their ability to act when my risk profile changes, which in turn will increase the interest rates charged to all people of all risk profiles. Shouldn’t my interest rate correspond to my individual risk of default? Why should responsible borrowers who have worked hard to follow the rules be punished for the actions of the irresponsible few?

I want to make clear, that I am in favor of the Fed and the government increasing spending for the education of consumers about these issues. This is a fantastic idea. In fact, I’ve noticed that many of my credit card companies themselves have made great efforts to help consumers better understand their policies and offer free financial education directly on their websites for no charge. I hope that the Fed recognizes this effort by the industry. But at some point, governing bodies need to recognize that there will still be people who choose not to take advantage of this free education or to educate themselves about how to responsibly manage their finances. It is unreasonable for you to shape policy around this minority, especially at the expense of the majority of Americans.

I strongly believe that the letters you have received regarding Reg AA R-1314 do not represent a cross-section of the American public, but instead, only the angry few who took the time to write to you. I’m writing to you because I know it’s the right thing to do, because I know many responsible Americans who feel the same way I do, and because Regulation AA R-1314 punishes those who have taken the time to educate themselves and build the financial discipline that we should be promoting as a society.


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