'GMA' Gets Answers: Some Credit Card Companies Financially Profiling Customers

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Manning says the process -- called "behavioral analysis" or "behavioral scoring" -- is a new twist on the same type of data analysis credit card companies previously used to prevent fraud.

Traditionally card companies used a customer's purchasing history to flag suspicious transactions. For instance, a card company might flag a large withdrawal at a casino if a card customer lives on the East Coast and never gambles.

But Manning says banks are now using the information to model the behavioral patterns of its customers in order to try to determine credit risk.

"Ultimately, the banks now are looking at what we purchased and they're making decisions on whether it's appropriate or not," Manning says.

He says in a recession it might be wise for some consumers to save money by reducing their spending or choosing to shop at a discount store. "And, yet, that creates a red flag where all of a sudden these companies are saying, 'You may be in financial trouble, and we're going to cut you off before we take a loss," Manning said.

"The ability to analyze and mine data is so much easier and faster since 9/11. Many people don't understand how almost every transaction they make today could trigger a readjustment in bank analytics," he said.

'They Changed the Rules…Without Telling [Anyone]'

Johnson says he wants to help others learn more about protecting their credit. He created a Web site called NewCreditRules.com and plans to update it regularly with news about the credit card industry.

While behavioral analysis may be seeing increasing use, it is only beginning to draw scrutiny from regulators and lawmakers. In a lawsuit filed in 2008, the Federal Trade Commission cited Compucredit, a third-party credit card issuer, for failing to disclose to customers the use of behavioral scoring.

In solicitations Compucredit advertised its cards could be used anywhere. Yet the FTC alleged the company reduced credit scores of customers who used their cards to pay for things like marriage or personal counseling or to retread their tires. Allegedly, Compucredit believed those types of purchases signaled a customer might be in financial distress.

In December 2008, the company agreed to settle the case for $114 million in credits to customer accounts. The company did not admit wrongdoing.

Manning says more banks may now be using behavioral analysis but not telling consumers.

"What are the rules of the game? That's all consumers really want to know," Manning said. "They changed the rules of the game without telling Johnson."

Experts say the bigger issue for customers like Johnson is not the immediate loss of available credit. Credit limit reductions can have large, long-term implications because they change the ratio between available and in-use credit and that is central to the FICO score.

"What they're trying to do is squeeze the people they're making money from," Manning said. "Unfortunately, a reduction in a line of credit could hurt someone's credit score."

Experts contacted by "GMA" -- including Manning -- say they believe banks may now be using data collected by customers to compare them to other shoppers at individual retail locations or by zip code, weeding out customers in neighborhoods hardest hit by the economic downturn.

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