by Locker Room contributor
Last year, Congress passed the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. It was supposed to really end the alleged abuses perpetrated by the credit card companies. The law forbids some penalties and interest-rate increases on existing balances.
Finally! Protection! A new bureaucracy will stop greedy credit card companies from unfairly penalizing you. And it won’t threaten the credit business. Yippie!
How has it worked out?
Not so well. George Mason University Law Professor Todd Zywicki points out that the new restrictions hurt more consumers than they help.
Since the Card Act passed, mortgage and Treasury bill rates have dropped a little, but credit card interest went up — from 13 percent to nearly 15 percent. Some banks also stopped offering credit to some people. JPMorgan Chase cut off 15 percent of its customers.
So the real result of this “consumer” regulation? “Hundreds of thousands of people can’t get cards who used to be able to have cards, and all the rest of us now have to pay more,” Zywicki said.
But maybe the people who can’t get credit cards are better off because they couldn’t handle credit wisely?
“Just to say they don’t have a credit card doesn’t mean that they don’t have credit,” Zywicki retorts. “They’ll just go to more expensive places — the local payday lender or the local pawn shop.”