I don't understand this as a business decision. How can they protect themselves from default? If you lend money to a US citizen who has given you his social security number, and he defaults, you can ruin him; you have legal remedies to help you recover your loss. But if an illegal alien defaults, what remedy is there? At a time when many lenders are already experiencing a growing default rate already due to improvident real estate loans, this seems like economic suicide.
The problem with their business decision is not the default problem. They are charging a lot of money for the card, so and assuming they've correctly calculated the amount of defaults, they've taken that into consideration when setting the fees.
The big problem with their business decision is that a lot of their customers are going to be PO'd by this, and are likely to close their accounts and bank elsewhere. It's a PR mistake.
"But if an illegal alien defaults, what remedy is there?"
Write off the debt and raise your interest rates.
At a time when many lenders are already experiencing a growing default rate already due to improvident real estate loans, this seems like economic suicide."
No economic suicide for them: They just pass on the costs to the rest of us. Just like the hospitals. And the schools.
I intend to talk to my bank next time I go there, and ask them about why I have to have so much documentation to open an account and B of A can be so cavalier about it.
22% interest will go a long way against the defaults!
So-called subprime lending is hot these days - there's money to be made. They protect themselves with higher fees and interest rates and sometimes required minimum bank balances.