PrintFebruary 22, 2010
New credit card rules will drive up rates, punish responsible cardholders
Well imagine that: another "reform" the Democrats imposed on the country for our own good, to force greater "fairness" into the financial order, turns out to be a wealth transfer from those who pay their bills on time to those who don't ("Law to hurt good credit-users").
Sound familiar? Remember how unfair it was for people to lose "their" house when they weren't making their payments? "Congress didn't intend to make credit more costly for consumers, but that's already happening." But not to worry: that's just an "unintended consequence."
One impact of the new law ... is that the pain is being spread more evenly, rather than being focused on delinquent cardholders, as before. "The price to pay for fairer credit seems to be higher interest rates all around."
So let me understand this: it's not fair that I pay lower interest rates just because I pay my bills on time. No, I now have the privilege of being forced to pay the costs when others do not pay their debts on time.
Even with credit reports and the advent of credit-scoring models, lenders still have trouble predicting with a high degree of certainty which specific borrowers might incur payment problems.
Before reform, lenders could quickly respond to this risk by raising rates on people who missed payments or got into other trouble, but that's not allowed now.
Consequently, all cardholders will be treated more or less the same.
Included in the collateral damage from these "unintended consequences":
• Higher interest rates and fees than before.
• New or higher annual fees.
• Reduced perks such as rebates or airline miles.
• Higher fees imposed on merchants, many of whom will pass the cost along to consumers as increased prices.
• Higher minimum credit purchases required by certain retailers.
Feeling better now with all this "fairness"?
Henry Percy is the nom de guerre for a technical writer living in Arizona. He may be reached at saler.50d@gmail.com.
