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Finally I was getting the truth: "Pre-approved doesn't always mean pre-approved." In one sentence, and without a hint of irony, a single customer service representative was correcting the ad copy of countless "pre-approved" credit card offers.

I was talking to FCC National Bank, the fourth largest bank card issuer in the country, the single largest issuer of gold cards, and, as a subsidiary of First Chicago NBD Corp., a "banking industry pioneer," according to The American Banker. Growing at a rate of 40 percent a year, FCC is certainly a pioneer, but of what--and at whose expense? For in their frenzy to get ever-bigger slices of a tight credit card market, banks like FCC are taking bold liberties with the truth in their ad copy. In better days, we might have called it lying.

"Banks are promising customers the moon to get them to sign up," says Robert McKinley, president of CardTrak, a credit card research firm. "It's a very competitive market."

Call it explosive. Banks mailed 2.7 billion credit card solicitations in 1995, triple the number they mailed only three years earlier. Two thirds were "pre-approved," and half were for gold cards, which have credit limits of at least $5,000 and, often, perks like extended warranty protection and rental car insurance. Because gold card customers have more money to spend and are generally better credit risks, banks want as many of them as possible. But they don't want the wrong people--people with too much debt or not enough income. The solution? Offer gold cards to everyone who meets certain pre-screened qualifications, then weed out the undesirables. Says McKinley, "I've seen [solicitations] from consumers who've had bankruptcies and everything else--terrible credit--yet they have been `pre-approved' for a gold card. It's obvious that it's not a serious offer."

By law (with a few exceptions) banks are required to offer credit to anyone whose credit report they prescreen; so they give the people who don't make the final cut no-fulls cards with lower credit limits. It's a common practice, but most banks are semi-honest about it; they tell you up front that your "pre-approval" is conditional--you need this much income, or your credit report needs to pass a more thorough screening. But a few banks--and we're not talking fly-by-night outfits--are trying to shortcut the process by hiding or omitting the unpleasant details, and deceiving as many people as possible into responding. This way, they not only get all the gold card customers they can, they also get a host of regular card customers with the false lure of the gold card. And they profit on all of them.

Meanwhile, unsuspecting consumers are not getting what they're promised, and they're getting something they never wanted in the first place. (At one point, some banks tried having a box on their gold card solicitations for customers who wanted regular cards if they were turned down for gold cards; so few checked practice was quickly discontinued. Since many inquiries and accounts can imperil future credit applications, people may have problems if they keep going for these gold cards they're promised and wind up with pockets full of $500 Visas. "People don't realize, the damage it may be doing to their credit reports," says Sandy Comenetz, an attorney in the legal department of the Federal Deposit Insurance Corporation (FDIC). "They may not find out until they apply for a loan and the bank questions it because of all these entries."

All that Glitters is Nat Gold

Having been turned down for a "pre-approved" gold card once myself (when my graduate student income failed to meet the $30,000 minimum), I wanted to know how banks justified their double-dealing. I got the chance to find out when I got a letter from FCC National Bank. They assured me I was approved for a gold MasterCard, that all I had to do was return a form and wait for delivery. Meanwhile, their fine print on the back said they would review my information and then decide if I'd get a gold or "classic" card (with a minimum credit limit of $500). I called them. How, I asked, could I be pre-approved for the gold card, and yet not pre-approved?

After the customer service rep told me that "pre-approved doesn't always mean pre-approved," I was transferred to a "credit approver" who told me, "They tell you you're pre-approved for the gold because the solicitation is for the gold. They want people in this particular bracket."

So it's OK for them to say whatever they want on the front of the letter as long as the real deal is in the fine print? "That's right," she said, "If they didn't put that there, then they would have to give you what they solicit you for."

Putting the details of an offer in fine print is nothing new, and not necessarily a problem. But it is a problem when even the fine print omits crucial details, or when the offer and its fine print are so at odds that they're totally contradictory. Everyone from the Federal Trade Commission to the Direct Marketing Association to the Better Business Bureau holds that fine print is no magic elixir, it doesn't automatically exonerate a company for anything else it may say.

FCC National is not the only (or the largest) bank that doesn't quite seem to get this. First Union Corporation is the sixth-largest bank holding company in the nation, and it has the 14th- largest credit card business. Like FCC, First Union's card business is mushrooming, growing an average of almost 40 percent a year over the last three years. They too are heavily into direct mail solicitation, and their ad copy is even worse than FCC's.

First Union's letter to me also said I was pre-approved for a gold card, and all I needed to do to get it was return a certificate. "We'll send your new Visa Gold card as soon as we hear from you," it stated, "... you risk nothing." Nowhere in the body of the letter was there any indication that the preapproval was in any way conditional. It was only the very last line of the half-page of fine print that read, "If I do not qualify for a VISA gold credit card, I apply for a regular VISA credit card. The minimum credit limit will be $500."

When I called to ask how I'd know whether I'd get the gold card or not, a customer service rep said, "I have no way of knowing. There's no way to know without applying." The second time I called, I was told something entirely different: I would need a blemish-free credit record and a $30,000 annual income. If I didn't qualify, I'd automatically get the regular card, which doesn't have the same perks as the gold card. I had to talk to four people to get the whole story--all information that should have been in the letter in the first place.

The consensus of experts who have reviewed this offer is that it is well beyond the pale. Representatives of the Direct Marketing Association, the Better Business Bureau, and even the Federal Reserve, the primary bank regulator, say it's deceptive. Ruth Susswein, president of Bankcard Holders of America, says, "It most certainly is misleading, no doubt about it. It shouldn't be `pre-approved.' It just shouldn't say that. That's what makes it so misleading."

Regulators, Shmegulators

So how does the nation's sixth-largest banking corporation get away with it, especially when the Federal Trade Commission prohibits unfair and deceptive advertising practices and specifies that "deception occurs when there is a representation or omission that is likely to mislead consumers acting reasonably under the circumstances"? Easy. Banks, unlike most businesses, don't answer to the FTC. They're regulated by any of four federal banking agencies, none of which has the same kind of detailed false advertising standards that the FTC has. They have, well, pretty close to nothing.

The Federal Reserve, which by charter has the responsibility for taking the lead on consumer protection issues among the bank regulators, admits as much: "There is no standard for determining if something's unfair or deceptive," says Adrienne Hurt, a managing counsel in the consumer affairs division of the Fed. Though the Fed has the authority to issue regulations and guidelines, they haven't used it to define or specifically prohibit unfair or deceptive advertising practices.

This is not a surprise to people who follow consumer protection issues in the banking industry. "Consumer protection has never been a priority for the bank regulators. In fact, they bend over backwards to protect the banks' interests," says Ed Mierzwinski, consumer program director the U.S. Public Interest Research Group. When it comes to deceptive marketing, he says, "banks are pushing the limits because they know there's no enforcement of the law."