An enterprising individual decided to test whether he could get a card using a torn-up application that he taped together and then filed out with a new (unverified) address and phone number.  He ended up with a shiny new Chase Mastercard sent to the new address.  (This story is a couple years old, but I just saw it today.)  If this doesn’t make you go out and buy one of those fancy super-duper
cross-cutting Ollie North/Arthur Andersen-endorsed shredders, I’m not
sure what will.  And we wonder why identity theft is a problem…   

Put that together with the latest story of a dog getting a credit card, and you’ve got to ask whether credit card lending has become like NINJA loans in the mortgage market–does the lender really care about whether the borrower can or will repay?   What’s going on here?  Has securitization created a moral hazard for the card industry?  It’s surely less than in the mortgage industry because card issuers carry much more of the debt themselves than say a mortgage bank.  Or are fraud costs so low that it isn’t worth the cost it would take to fix them?  Or is something else going on? 

I have trouble believing that this is just a couple of isolated errors or the result of a bad apple.  There are just too many examples of minors and pets getting "pre-approved" card applications.  Or as Alan Greenspan put it a few years back "Children, dogs, cats, and moose are getting credit cards."  Thoughts?  Comments are open.