As promised, the Obama Administration was able to get Congress to finally pass a law regulating the unscrupulous practices of credit card companies. The Credit Card Accountability, Responsibility and Disclosure Act of 2010 that went into effect today seeks to restrict the ability of credit card companies to engage in certain predatory tactics in the marketplace. What lawmakers failed to realize are basic principles of economics.
According to the Business Insider article, “Here’s 10 Ways Credit Card Companies Are Still Screwing You”, “whacking the bad guys” is simply a game of whack-a-mole. When government thinks it has got the credit card companies pinned down, fees and costs just pop up somewhere else. These are basic laws of economics: you don’t “hurt” the so called corporate “bad guys”; you can only pass yet more burdensome costs on to the consumer. Here is the Business Insider list of ten (10) ways the law is only causing credit card companies to be even more predatory toward even the most loyal and creditworthy consumer:
1. They’re jacking up rates.
2. They’re increasing penalty rates.
3. They’re closing unprofitable accounts and reducing credit limits.
4. They’re increasing cash advance and balance transfer fees.
5. They’re increasing annual fees.
6. They’re manipulating rates–to their advantage.
7. They’re redefining terms…to collect even more fees.
8. They’re cutting rewards.
9. They’re adding NEW fees!
10. They’re closing accounts without notice.
All of these new tactics, by law, must be included in writing in all credit card contracts. However, does the average consumer even read the fine print of the credit card contract when he signs it anyway? Will the credit card companies being forced to send yet more paper and fine print to each cardholder have any practical effect at all?
I sincerely hope that this result is not a surprise to our lawmakers in Washington who wrote this law. If it is, I seriously consider throwing them out of office and sending them back to college. I think they slept through the lecture of “marginal cost drives minimum price”. Why don’t we further STICK IT to them by dramatically increasing taxes while we’re at it? That’ll show him; and by him, I mean the American consumer…