Saturday, August 22, 2009

The Great Discover Card Caper

OK - you'll have to bear with me on this - the back story is complicated.
Step one - I've owned Wal*Mart stock for a long time, and it has been a rewarding investment. That makes me a happy Sam's Club shopper; I get great prices and feel like I get a little of it back. Sam's sells gasoline at most of its locations at generally the lowest price around. To purchase quickly, one needs a Discover Card. Specifically an "Advantage Member" Discover Card. So, I got one and every so often, as Discover works, you get a little rebate check.
Step two - I've also owned Morgan Stanley stock for almost as long as I've owned Wal*Mart. Until the crash of 2008, MS had performed well also. For a while, MS owned Discover, but eventually spun it off to shareholders. As a result, I own a little bit of Discover stock.
Step three - Discover outsourced management of some of its portfolio to the financial arm of GE, including the Sam's Club affinity card program. Guess what: I've owned GE since the mid 1990's.
I'm connected as an investor to all three of the entities involved in the Great Discover Card Caper. Last summer while traveling I attempted to buy a laptop in a Wal*Mart with my Discover card. I was turned down. Since we've always paid the balance in full, and we guard our credit assiduously, I was surprised and a bit embarrassed. Visa approved my charge with no question. Upon my return, I jotted a little note to David Nelms, Discover's CEO, summarizing the event and just letting him know that he might have a process problem. I was contacted by someone from Discover, who tried to be helpful. But, it turns out that Discover had outsourced credit and other operations of its Sam's Club affinity card to GE's credit card business unit.
Basically then, I forgot about the whole thing. Then this summer we were shut down by Discover - purchases turned down. Apparently, we missed a payment. We searched everything and never found a statement for the period involved. But, again, we had always paid the balance in full and prior to that never missed a payment. It seemed inappropriate to me to decline our purchases without so much as a phone call since we had been good customers.
On top, Discover hit us with a big late charge and penalty. Fool me once, shame on you, fool me twice - well, you know the rest. I've got other credit options - Mr. Nelms - your card is out. And to Jeff Immelt: in the 2001 GE annual report you announced an initiative to reduce "back room" staff in favor of customer facing. I was concerned at the time; it turns out that would have been an excellent time to sell GE. Those back room people do things like check credit, collect the bills, run risk models and the like. Since you've had accounting restatements and the GE Finance unit has gotten creamed, maybe you should have left some of those people in their jobs.
They might have even approved my purchases.

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