A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.

Sir Winston Churchill

A good cause

Credit Cards and Congress

Thursday evening , April 30, 2009.

My gut tells me not to expect much from the credit card Congress bills.

Some studies suggest that the (small) changes proposed in the most recent Congress bills could hurt the credit card industry’s bottom line for as much as $10 billion yearly.

On the other hand, banks are the biggest handout lobbiers in Congress.

Then, it’s pristine clear why bills are watered down as they get closer to passage, or they sit in limbo for years, till a new bill proposal is created, and the process starts all over again.

The main issues not mentioned in the bills, which I believe must be included are:

  • Setting usury limits to cap interest rates
  • Disallowing one sided changes to the credit card contract
  • Making the fine print illegal

Obviously these measures would restrict the amount of credit offered, which contrary to banks arguments, I believe is a healthy thing.

It’s damaging for all involved to offer and take any kind of loans at usury level rates. In the end, consumers and banks fail at this game, and the whole of society has to come to the rescue at a huge cost.

Why are credit card issuers allowed to change contracts unilaterally? This is not the normal occurrence of doing business. Let me clarify this situation. A landlord cannot impose his request by simply telling the tenant that he will raise the rent unless the tenant replies within 30 days. The landlord may request a change to the contract, but, he may never impose a change by a mere 30 day reply imposition. If the 30 day reply imposition is abolished, then banks will have to offer us something in exchange to alter their credit conditions — a two way, instead of a one way street.

There are a few signs that this time around we may get a fair break. President Barack Obama met at the White House last week with the credit card czars and made it clear that he wants to sign a bill into law. He reaffirmed this priority at his prime-time news conference Wednesday evening, saying legislation was a must to protect consumers from “abusive fees and penalties.” 

Setting the record straight.

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