Credit-card issuers that target those with poor credit scores are another group with questionable practices, according to a recent report from the Consumer Financial Protection Bureau. In its research, the CFPB found that the costs of cards issued by these companies are significantly higher than the costs of cards issued by more traditional competitors. These specialized lenders are much more likely to approve not just subprime individuals, but the deepest subprime individuals—those with credit scores that fall below 600.

Why isn’t a higher approval rate for those with very bad credit a good thing? Isn’t that more inclusive? Not always. Some credit-card companies’ business models depend on charging their customers high fees—people who are unlikely to be able to afford them. These increased fees are for things that are inescapable, such as monthly account maintenance. (Major credit-card companies, on the other hand, are making most of their money from collecting late payments and interest, not recurring fees.) Customers of these subprime companies don’t need to do anything unusual to rack up fees—that’s just a part of signing up.

Where the Money Comes From

CFPB

But perhaps worse than the high costs of the cards is the way that these companies recruit customers. They target them by mailing pre-approved offers that contain intentionally opaque, high-level financial language and agreements that are, on average, 70 percent longer than card agreements from other lenders, according to the CFPB.

“Despite offering longer and more complex credit-card terms than mass market issuers, they send those mailings disproportionately [sic] to consumers with lower levels of formal education,” the CFPB report found. “Specifically, agreements for credit-card products marketed primarily by subprime specialist issuers are particularly difficult to read.” According to the report, making sense of these statements would typically require at least two years of college or post-high-school education. Less than half of the people targeted by these lenders have any college education, and the number of such households sent direct mail by these lenders doubled between 2012 and 2014.

It might seem easy to write off some of the discrepancies between these fringe card-issuers and mainstream banks because mainstream banks aren’t dealing with risky borrowers who regularly fall behind on their payments. But the report shows that that’s simply not the case. The CFPB found that compared to subprime card owners at major financial institutions, customers of these specialized subprime card services faced more onerous fees and trickier financial language. And these specialized shops don’t serve nearly as many subprime clients as more established brands do. According to the CFPB’s estimate, fringe subprime services account for less than a quarter of all credit-card accounts among Americans with subprime credit scores.