U.S_Citizen_Bank_Case_Analysis

Case analyses have proven to be a great method for empirical studies of ethics in business “allowing for normative and conceptual inquiry” (Business Ethics, 14). Each case must be approached with a careful and thorough set of eyes. The particular case being discussed in this essay consists of U.S. Citizen Bank and their distribution of credit cards to college students. The dilemma in this case explores the ethical dimensions of marketing credit cards to college students. It brings into question whether or not actively targeting college students falls under the category of predatory lending. This situation manifested itself due to a combination of several factors. A major one being the merger between U.S. Citizen Bank and Louisiana Purchase Bank (LPB), which resulted in the adoption of the already established LPB’s card structure, where credit cards were given to students much more liberally, even marketed exclusively to college students. Prior to the merger, U.S Citizen Bank’s student cardholders had a similar uncollectable percentage as their standard cardholders. LPB’s student cardholders had a much higher and volatile uncollectable percentage. The merger caused U.S. Citizen Bank to become more “flexible” when issuing student credit cards due to LPB’s reputation for innovation and their new demographic of college students. Central to this dilemma is Michelle Jeffries. After graduating magna cum laude at University of Montana, Michelle got a job with LPB. She quickly climbed the corporate ladder and found herself in the LPB Card Services division. She was directly influencing LPB’s activity in relation to the issuing of its credit cards to college students. She pioneered the directional shift to marketing credit cards to college students. Michelle continued to work with the Card Services division after the merger with U.S. Citizen Bank and finally implemented stricter criteria for new applicants after years of scrutiny. The main ethical concerns stem from LPB’s aggressive marketing strategies, lack of information given to prospective customers, volatility of agreement terms, and the rejection of the moral point of view in their policy decisions. All of this activity was overseen by Michelle. Predatory lending normally involves an inappropriate targeting of customers and a lack of transparency, which can be seen in LPB’s credit card distribution methods to college students. As the student card evolved, so did interest rates, late penalties, and annual card charges, all seeing an increase. One could argue that if both Michelle Jeffries and the U.S. Citizen Bank (formerly LPB) were acting with a moral point of view in mind, they would not be raising interest rates and extending credit to students who can’t afford it. That completely disregards the dignity or worth of the student by forcing added pressure on them, causing them to “withdraw from school and work full time in order to pay off their debts” (Robert Manning, p. 11). This is one of several different consequences of predatory lending. It leaves people stuck in debt and forced to put their future plans on hold. The core stakeholder’s involved in this case include the U.S. Citizen Bank, college students, Michelle Jeffries, and the Universities. Whether or not these students are being made subjects to predatory lending holds the most interest to those aforementioned. The students have a high interest about whether or not they are being treated fairly by the bank. They also have right to know the terms of the agreement, which is normally not fully disclosed to the student up front. The student also may have a duty to their neighbors to warn them about the predatory lending; a duty simply by virtue of the Golden Rule. U.S. Citizen Bank also has a high interest in this dilemma. They do not want to be perceived as predatory lenders, but they want to be able to market their product to the most profitable demographic, which happens to be college students. The bank has a right to offer credit cards to college students, but it does not need to be so aggressively. U.S. Citizen Bank has a duty to the student cardholders, ensuring that they are clear about how to manage their card and what their limits and rates are. Also, by virtue of respecting individual rights, the bank should avoid targeting people with low income and low probability of making scheduled payments. Michelle has a very high interest in this dilemma; her reputation and possibly her job will be directly affected by it. She arguably also has a moral duty to stop the vicious targeting of college students and make an attempt to more carefully regulate card issuing. Michelle also has the right to change the policy if she feels it necessary; the decision is entirely hers in this case. All Universities involved have a very high interest, especially those partnering with banks to provide credit cards to their students. They don’t want their students struggling with credit card debt and being forced to drop out. They also do not want to be associated with supporting any sort of predatory lending. The Universities may also have a moral duty to educate the students about the dangers of credit card misuse. Like almost all case analyses, it is nearly impossible to find a clear cut solution to this dilemma. It is pretty apparent that U.S. Citizen Bank was involved in at least some situational predatory lending through their offering of incentives and benefits. It would be a good place to start if Michelle Jeffries, collectively with U.S. Citizen Bank, implemented a plan to reduce their excessive marketing to college students and taking a less threatening approach. While offering a less threatening marketing alternative, Michelle should also tighten credit card policies so the cardholder has time to prove he can make the payments before generously increasing a credit limit. I would also recommend that all Universities discontinue their contracts with credit card companies and prohibit solicitation, like many have them had already done toward the end of the case. This avoids conflicts of interest and discourages banks from participating in predatory lending. In terms of U.S. Citizen Bank as a whole, it would be beneficial to see a return to the more conservative lending methods, with more emphasis on quality rather than quantity. Asses each customer on an individual basis, and confirm that they are financially stable enough to pay off a credit card. Monitor limit increases more carefully by waiting for clients to show a sense of financial stability before they have access to a higher credit limit. With Michelle’s implementation of the plan to reduce U.S. Citizen Bank’s aggressive marketing to college students and have tighter regulations for cardholders respects the primary rights to all individuals involved. U.S. Citizen Bank still has their rights to both market and sell to college students, just not as aggressively. Michelle’s right to market credit cards is still maintained, just limited by a few reasonable restrictions. The Universities maintain all of their rights, no longer having to worry about predatory lending and will benefit from the decrease in students with debt issues. The student’s rights are put in the forefront in this case, because they are the victims of questionable lending practices. The emphasis is on eliminating predatory lending, so the student’s rights are being defended and fought for with these changes in policy. The bank’s duty is considered as well, which is providing the customer with a full understanding of the agreement, which had not been respected in the past. The Universities duty to provide students with a non threatening environment is also reinforced. The interests of all the parties slightly conflict, which is almost impossible to avoid. However, each person manages to maintain their moral point of view and everyone is respected as such. Granted, the banks may have wanted to avoid more regulations and continue to grow at an exponential rate, but their autonomy is being respected, and the rationale for the increased regulations is morally justifiable. The virtues of all four stakeholders are also respected by these implementations. The Universities, Michelle, the students, and U.S. Citizen Bank all maintain a level of professional integrity throughout the changes, no one party being obviously favored. Keeping in mind the interests, rights, duties, and virtues of all the stakeholders, I believe that these series of small changes will improve conditions for all parties involved. It is extremely difficult to offer a solution that ends up as equally beneficial to all parties involved. The changes mentioned will allow for a better quality of life for all parties involved, both ethically and personally speaking. That being said, moral insight must continue to be sought through constant reflection.