Posted 5/12/2009 06:46:00 PM by Douglas

I sure hope I'm not the only one that finds the irony in this. We give dumptruck after dumptruck full of money to banks because they're in trouble, but now Barry wants to take one of their most sacred cash cows and put her out to pasture. Does that makes sense?

The problem with the credit-card industry isn't just credit-card companies - it's you too. This week the Senate takes up a bill that would seriously clamp down on some of the industry's most unsavory practices, a piece of legislation that President Obama has said he wants on his desk by the end of the month. The bill, which builds on rules issued by the Federal Reserve Board and other agencies at the end of last year, would do away with interest-rate hikes on existing balances, prohibit issuers from putting customer payments toward lower-rate balances first and abolish the practice of raising a customer's interest rate because he was late paying a bill to someone else.

I don't have to wait for the chorus: The banks are going to say they can't afford to operate if they don't have these douche-bag maneuver in their tool kit. That may or may not be abject horse shit, but really, is this the kind of "financial regulation" that we need to be focusing on right now?

Credit-card companies, though, may not be the only ones we need to be protected from. Every penny of Americans' nearly $1 trillion in revolving debt started with someone - some individual person - whipping out a piece of plastic and making a decision to use it. We could consider that free will and just call it a day, but there's plenty of reason to believe the story isn't so simple. There are piles of evidence that people are bad decision makers when it comes to how they use credit cards. Even when presented with full and fair information, they often make decisions that are not in their own economic best interest - a reality only partly taken into account by the new rules and pending legislation.

Boo fucking Hoo. I'm not in favor of any kind of predatory lending, but this doesn't even come close, and it's totally avoidable. A 5% mortgage on a $200K house is going to pay $186K, in interest only over the 30 year life of the loan. And that's a good loan. That makes credit cards look like amateurs.

Late fees, over limit fees, changing interest rates; these are all pretty slimy moves, but you get no sympathy because you don't want to pay your bills. There are plenty of people that can't pay their bills, and it's tragic that they have to use credit cards to finance necessities like health care (or even worse, food), but this type of regulation will make it harder, not easier, for them to get credit when they need it.

What we need to do, that argument continues, is frame information about how much credit cards cost in a way that really drives the point home. In 2007, a group of Senators introduced a bill that would have required credit-card companies to state on each billing statement how long it would take a person to pay off his balance and how much it would cost in principal and interest should he make only the minimum required payment each month.

I would love to see this, along with how much total interest it's going to cost to get there. I saw the spokesman for the credit card PAC on Frontline say the reason they don't put your pay-off time on your monthly statement is because if you made an additional payment between statements, that number wouldn't be accurate. And he said that with a straight face.

Your interest rate for an unsecured loan is going to be based on the likelihood you pay it back, so it's not a stretch that people that miss payments get a higher rate, and if you're bitching about late fees, try not being late. Maybe if Washington (and Austin) got less of our money off the top we wouldn't be looking to Visa to finance the rampant consumerism we're told the country can't survive without.