Credit Card Firm Cut Limits After Massage Parlor Visits, Feds Allege - Via Threat Level:

Government regulators are suing a sub-prime credit card issuing firm, alleging that the company secretly profiled its customers' transactions and reduced the credit limits of those who used the cards at bars, marriage counselors and tire retread stores.

The Federal Trade Commission filed the complaint against CompuScore in a federal court in Atlanta on June 10, alleging the Visa-card marketing service routinely abused debt collection law, failed to disclose hidden fees, and withheld the credit limits it promised to subprime borrowers.

Most intriguingly, however, the complaint (.pdf) alleges that CompuScore kept track of the kinds of purchases its card holders made, without adequately explaining they were doing so or what kinds of purchases would lead to lower limits.

CompuCredit has based these credit line reductions on an undisclosed “behavioral” scoring model that penalized consumers for using their cards for certain types of transactions, including transactions touted in their solicitation materials such as cash advances and transactions with the following types of merchants

•  Direct marketing merchants
•  Marriage counselors
•  Personal counselors
•  Automobile tire retreading and repair shops
•  Bars and night clubs
•  Pool and billiard establishments
•  Pawn shops
•  Massage parlors.

The FTC is not suing because it believes the practice is illegal. Instead, the regulators contend that the company wasn't forthright about what it was doing.

Has anyone heard of any other credit card companies doing the same? If so, THREAT LEVEL intends to be paying with cash or a prepaid debit card a whole lot more in the future.

Via BusinessWeek

Photo: A visit to this massage parlor to help with a carpal syndrome problem cost THREAT LEVEL half of its available credit line. Credit: Captpaddy/Flickr

(Read Original Article - Via Threat Level.)