Friday, May 22, 2009

Credit Card Reform

Congress quickly passed a credit card reform bill. Good for them. They could have gone a lot further and limited interest rates but they at least did something.

Normally my Libertarian instincts say that the government shouldn't interfere with private business but I make the exception that the government needs to keep business honest. Current practices by the credit card companies are less than honest. They lure people in with promises then change the rules. The idea is that once you are hooked they can gouge you with unexpected fees and penalties.

A major problem in our society is that credit is too easy. Every time I go to Sears Hardware I'm offered a credit card to be issued on the spot. Other stores do the same thing. It's twofold deal for them - they sell you more of their merchandise and they make a killing on the credit cards.

Far too many people find themselves with an unmanageable debt on their credit cards. One way that they have been handling this is to roll it into their mortgage based on inflated housing prices. That's what fed the housing crisis.

Congress should go further. The Republicans passed a terrible bankruptcy reform bill a few years ago. It gave the credit card companies more claim on the assets of bankrupt individuals. The Democrats should repeal it.

A few decades ago the credit card companies didn't give you more credit than you could handle. They didn't want to get stuck. We need to go back to those days. Part of this is increasing the risk to the credit card companies so that they will be more careful with their money. If they are more careful then consumers are less likely to get in trouble.

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