Plastic Changes

So for those of you whose radar does not catch all of the things going on in congress, there is a very interesting bill being debated. This is the Credit Card Accountability Responsibility and Disclosure Act. This bill (text here) is to limit the practices that the general public think are unfair. This recently passed a major hurdle in congress. This is a very interesting bill for me for a couple of reasons. I have run across an interesting article discussing the merits of the bill (here a short but well worth it read). I quick search will find a lot more website articles, I leave that as an exercise for the reader. ;-)

First, it is important to protect the customers from various underhanded things. This is a very 'big government' policy. This bill effectively tells the country that the federal government will be in charge of putting cuffs on the credit card industry instead of the states. For a long time the different state laws has been a major headache for consumers. For customers who can get credit this is a very good bill. This will prevent major increases without warning, outlaw universal default, and force old interest rates on old debt. For the consumer these are good things. However there is 45 day time frame for the laws to become enforceable and in that time expect very large increases in rates.

Second, this law will be an interesting application of government intervention because the affects are likely to be large. Mostly this will affect customers with poor credit. If I am a credit card company and I can't charge people based on their situation then the risk will have to be spread over all customers. So the low-risk customers will have to subsidize the poor credit customers. This will raise rates. (Though you should never carry a balance anyway.)

In the long run the consequences of this bill are unknown as both sides have very good points. I believe that in time credit card companies will find a way to make money on risky customers through credit cards again but in the short term this will (while helping most customers) hurt most customers and will significantly change the game. I can see a world where credit card companies become more like auto insurance companies where they have 'high risk' arms of their business.

As a outrageous side note: (Read the article I linked to,) 'The bill also allows carrying of loaded guns in national parks.' Just shows how 'efficient' the government is. I mean credit cards and carrying guns into national parks are connected in my mind. I hate the way bills are written these days. (What a boondoggle.)