Some time ago I wrote about the impact of the new consumer protection measures. In fact, I was keyed onto this by a post from Dave Ribar on the subject.
Dave’s main point was that credit card companies won’t raise the annual fees they are charging their best companies; so far he is right. But those credit card companies ARE doing other things. According to an article in the Wall Street Journal, we are seeing:
Credit-card issuers increasingly are moving consumers into variable-rate cards rather than fixed-rate ones, due in part to the new credit-card law slated to go into effect in phases starting in August.
What this means is that credit card companies are simply determining that government regulation is correctly seen as “damage” and they are routing around it. See, by definition, the variable rate cards are not subject to the new law passed by Congress.
The new law limits creditors’ ability to raise interest rates, but it can’t control changes in the prime rate – the index that’s the basis for most variable-rate cards. So even after the new law starts to limit rate increases, variable-rate cards will still change if and when the index they’re based on changes.
Again, this law is another example of the government stepping in to rescue people who are simply demonstrating irresponsible behavior. If I have money to borrow, and I determine that Pete is less trust worthy than Sally, there is only on way in which I borrow to Pete; charge him more. If Pete would like to enjoy better terms, he could accomplish that by proving that he is more trustworthy.
Again, if a certain group of people feel tha high risk borrowers should be afforded credit, they are free to do this with their own money. Forcing others to do it by rule of law is ignoring basic laws of economics as well as going against human decency.