AUDIE CORNISH, HOST:
Speaking of crippling deficits, the ubiquitous Suze Orman is trying to tackle debt of a personal nature. The financial advisor and popular CNBC host recently jumped into the prepaid debit card business. It's an industry littered with celebrity brands, cards endorsed by the likes of Kim Kardashian and Russell Simmons. The general idea is this: You load up the card with money and then you can only spend what's already there. Of course, there are fees.
Suze Orman's prepaid debit card is issued by MasterCard. It's officially called the Approved Card by Suze Orman. And in her typically energetic style, she told us it is different from the rest.
SUZE ORMAN: The main purpose of this card is for the first time in history, a prepaid card - a debit card - is going to be sharing information with TransUnion, a major credit bureau, so that over the next 18 to 24 months a major credit bureau - and I hope the other two join me - will be able to evaluate this information and determine if activity on a debit card can create a FICO score, or a credit score for you.
And I think this is essential thing that we need to do for the 150 million people today in the United States of America, either in poverty are very close to it.
CORNISH: And, as you mentioned, TransUnion is the one credit bureau that did respond to this. And they're doing it in a pilot program essentially, trying to collect around 24 months of data.
What's important about their involvement? Because I think most people may be a little bit nervous about credit bureaus in general. And I wonder if they should be fearful of their credit activity on this card being used against them in some way.
ORMAN: Yeah, what's interesting to know is that all of the information on this card that we're going to be sharing will be aggregated, number one. It will be anonymous, number two. And number three, if you have to opt in if you want to be part of the credit project that I'm calling it.
The only people that can really evaluate if, in fact, debit card activity can create a score, happens to be the credit bureaus. So, I would like the other two credit bureaus, as I said, to join me in this. I would like the other prepaid cards, the other debit cards, to join me in this. Because today, people don't want to carry around credit cards. Today, people feel like they have been burned by the system. They want to have a way that they can spend their own money and be able to be given credit for having done so.
CORNISH: At the same time, because they're only doing it as a pilot, how likely is this really to change things in the industry? I mean, it seems like they're kind of - not a reluctant partner - but certainly only giving this a try. And how do we know it's really going to help customers or do much of the industry?
ORMAN: It is obvious that the credit scoring techniques used today are really out of date. There is no way that FICO can understand where is the money coming from that is paying your credit bills on time? Are you taking a payday loan? Are you taking it from your 401(k)? What are you doing?
So, today we have to change how FICO scores are created. Now, this might not ever happen. But I can tell you, over the next 18 to 24 months, I'm going to give it everything I have.
CORNISH: I mean, essentially, it seems like somehow this would go against the advice I hear from the Suze Orman in my head, you know, of like you shouldn't be using credit in this way, right?
ORMAN: Except that remember this isn't credit, this is debit. In the olden days, I would have said something different. The reason why I am changing and I'm bringing out a prepaid card is there are also 70 million un-banked and under-banked people that are using these cards, and they are not going to stop using them. And they need an alternative for the cards that are out there that are charging them a fortune.
It is my word: You will never see the fees on this card go up. And if anything, they will go down. And it is my intention to take that $3 a month fee - or 75 cents a month if you get four cards everybody in your family - that it eventually goes away.
CORNISH: Suze Orman, thank you so much for speaking with us.
ORMAN: Thanks for having me.