Credit-Card Issuers Squeeze Extra Profits

January 20, 1985

Regarding "Don't Bank on Bankers' Credit Card Disclosures," ("For What It's Worth," Jan. 14). There is an added item of profit in credit cards. The periodic rate is based on the day in the billing cycle when the payment is made. The sooner the payment is made after the closing of the previous billing cycle the less the interest charge. However, the statements are usually not mailed out until more than a week after the closing date, and then they are usually mailed out on a Thursday or Friday.

The payment cannot get into their offices until Monday, meaning an added delay over the weekend. Although the added cost is small for each account, the total profit for the credit-card issuers is probably in the hundreds of thousands of dollars and even in the millions, just for delaying the mail a few days.

My mail has been postmarked as late as two weeks after the closing date.

BERNHARDT SANDLER Venice Your article concerning bank card finance fees prompts me to report an aspect of this that has concerned me for some time: banks make a finance charge on the member fee, before the customer has a chance to pay it.

Some years ago I saw that when a bank first listed my membership fee on the monthly statement, they added a finance charge to this amount. Small as this amount was, it was clear that with the total number of cards issued, the bank was making additional profit on all its members fees, before the customer had a chance to pay the fee.

I wrote to various banks in protest, but my letters went unanswered. I made it a habit to enclose two checks with payment for the monthly statement--one for the membership fee and one for the minimum balance on "purchases." It still made no difference. However, I have persisted in my complaint, and have had some encouragement from the chairman of the Committee on Banking, Finance and Urban Affairs in Washington.

The most blatant example of this practice came last year when I received a credit card from another bank, and before I could use it (I made no purchases), they sent me a billing statement listing my annual card fee of $18 plus a finance charge of 8 cents--claiming I owed them $18.08! When I protested, they said the charge was in error.

In brief: I claim the membership fee is not a purchase, and if I pay the fee when due, and the charge is not carried over to another billing date, they have no right to charge a finance fee on this amount.

Since my first protest about this to the Chase Manhattan Bank, they now state on the back of each statement that lists the terms of our agreement, that "there is no finance charge on the annual fee." I say all banks should do the same.

BASIL LANGTON Los Angeles Unethical to Audit OPEC Earl F. Cheit's article "The CPAs Who Will Audit OPEC Members' Activities Face Touchy Task" (Viewpoint, Jan. 6) presumes that American auditors should contribute to the perpetuation of a scheme that would be deemed illegal in the United States--a cartel. The Organization of Petroleum Exporting Countries is a cartel. American law forbids a cartel to operate here. Simply because the OPEC cartel operates outside the United States should not encourage American certified public accountants to ignore their professional principles.

The key factor that precludes an American CPA firm from undertaking an OPEC cartel audit is contained in Cheit's article itself, when he refers to "a paper delivered two decades ago by Leonard Spacek, one of the most creative and lively intellects in the (accounting) profession." According to Cheit, Spacek said that one of the three things auditors must do is that "they must follow the letter and the spirit of the law in their work." How could a CPA engage in perpetuating an act that is illegal in the United States, such as a cartel?

Which brings us to the subject of ethics for CPAs. The code of ethics governing members of the American Institute of Certified Public Accountants, to which most CPAs belong, includes the following principles:

"A distinguishing mark of a professional is his acceptance of responsibility to the public."

"A certified public accountant should be fair and candid with his clients and serve them to the best of his ability with professional concern for their best interests, consistent with his responsibilities to the public."

A CPA "must not permit his regard for a clients' interest, however, to override his obligation to the public to maintain his independence, integrity and objectivity. The discharge of this dual responsibility to both clients and the public requires a high degree of ethical perception and conduct."

In all the above pronouncements, the emphasis is on a CPAs responsibility to the public. Assisting in the perpetuation of a cartel that has damaged not only this country, but the free world as a whole, would not be in keeping with the professional principles of CPAs.

RALPH BOVITZ Encino Letters to the Business Editor should be typed and as brief as possible. All letters are subject to condensation.

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