In 1996 another important Supreme Court decision opened the door to bigger profits for the credit card industry and rafted / new complaints from their customers. That decision, Smiley vs. Citibank, much like the Marquette decision before it, lifted the state restrictions this time on the fees that credit banks could charge.

“We were working this thing here for a good course free market pricing”.Duncan MacDonald who was one of the lawyers who worked on this Smiley case..

"The late fees that were common across the industry up until Smiley were in the 5 dollar and 10 dollar range ,and the economic thinking was that they had to be a flexibility to allow up to 15 dollars.but when Smiley came along, and took the little of it, they went from 5 to 10 to 15 to 29 and recently it’s gone up to 39 ,and I would guess that it's probably gonna go up to 50 dollars a year and a half from now. I certainly did imagine that some day we might end up creating a Frankenstein.”

" Frankenstein? What do you mean Frankenstein?”

I looked at that and said to myself, "is 50 dollars a fair fee?" plus a 25 percent / interest rate and all these other fees fee that / along, for folks / probably not that risky, is that fair? I looked and I said to myself, there is a Frankenstein, we create something that has to be ,has to be dealt with.

Since Smiley Credit Card companys have doubled the amount of revenue they generate from fees, late Fees ,over the limit fees, returned check fees and / alike.

Fee income has gone up much much faster than interest income in the business. So the fees are meant as the penalty to make sure that you pay on time or they are profit stream,

Oh they really have become a profit stream.it’s not just the fees that they charge, even though they are 3 or 4 times higher than they were less than 10 years ago .That’s the tupity iceberg when it comes to the penalty that inflict on consumers with these situations when they make late payment. It’s the penalty interest rate that really does the damage, your interest rate could double overnight.

Just so I understand the interest rate are not regulated, they can change the interest rate relationship that you have with them a 15 days notice. So that's a major source of profit/ for them. And the fees are now no longer regulated.

That’s exactly right. it’s a..en wide open. We are beginning to see banks do all this tweaking. or they are changing the interest rates, and raising fees, adding new fees, all kinds of way they calculate the interest, setting the due dates on a Sunday and a holiday on the hopes that maybe you'll trip up and get payment in late. It’s become a very anti-consumer marketplace.

Even the industry’s top lobbyists disconcert,”
I think it would be shortsighted for a credit card company to have fees that would make somebody angry because they are likely to lose their customer and I think it's gonna cost them more to replace that customer, then they are likely to get another fee.”

" You have bankers who skyrocket rates from 14 % to 25% and 40 dollar late fees and backcheck fees and so on to fall on the shoulders of the less well off. Yes, it's, something bad has happened.

So we need regulations,

Oh ,we have regulation , we have regulation already. They control the currency, regulate(s) all the national banks, and have very vast powers.

The office of the Comptroller of the Currency ,the OCC is an obscure Washington agency ---part of the Treasury Department and it regulates the national banks, banks like Chase, Citibank and the MBNA that issue most of the credit cards in this country. Julie Willams is the acting comptroller of the currency.