The burdensome, patronizing, new credit card regulations proposed in
the wildly misnamed “Credit Cardholders Bill of Rights” will hurt just
about every type of U.S. consumer.
Indeed, the new restrictions that self-styled “consumer advocates”
and their trial lawyer allies envision will result in immediate,
sizeable interest rate and fee increases for the majority of Americans
who pay their credit card bills on time. Quite simply, efforts to cap,
reduce, and ban penalty fees and interest-rate hikes for bad customers
will axiomatically lead profit-minded companies to seek returns
elsewhere. Many will hike the annual fees and interest rates for
everyone else. New ways to litigate likewise will create another
lawyers’ payday while doing nothing to help ordinary Americans.
Those who live on limited incomes or fail to pay their bills on
time—the supposed beneficiaries of the proposals—will also see
themselves hurt. Many will be denied credit that bureaucrats decide
they “can’t afford.” More will find they only qualify for the “secured
credit cards”—which require a bank deposit against the credit line—that
predominated in the dark days before deregulation helped banks figure
out ways to extend credit to everyone.
In fact, the current credit card regulatory system serves consumers
pretty well. Although hardly anybody reads through the dense fine-print
agreements that come with credit cards, the mandatory easy-to-read
disclosures of interest rates, penalties, and fees already give
consumers a simple repository of information. The widespread
availability of balance transfers—an option on nearly all
non-merchant-branded consumer credit cards—helps consumers “repay
outstanding balances in one fell swoop” and transfer money away from
card issuers whose policies they don’t like.
Of course, the situation isn’t copacetic. Credit card agreements
remain difficult to navigate, and many consumers find card issuers
unfriendly. A drastic simplification of current regulations could
eliminate a lot of the difficult fine print. Decreased regulation of
credit card issuers, likewise, could let them find more creative ways
to serve consumers’ needs. In short, we need less regulation, not more.
See the whole debate at BusinessWeek's Debate Room.