That's the point though. Credit should not be for everyone. I fully agree with what you're saying (that credit cards will get more expensive and restrictive). I fail to find why it could be seen as a bad thing. So all this pomp over victory of the evils is definitively justified, as these effects are also good for the consumer... in the same way putting the cookie jar on top of the fridge is good for your children.

Besides, with the ridiculous ease you could get credit cards in the past (And credit in general, I was offered a loan that would basically eat nearly 60% of my paycheck monthly for 5 years... from a "reputable" bank), the restrictions might not be too bad. They do want to make money, and lots of it. This might just mean they'll now have to pay attention to how they do their business.

"Reform" means to improve.

@m4ximusprim3:

I'm strongly opposed to this sort of legislation. Currently, people paying cash are subsidizing the nice cash back I get by paying credit. Works for me.

All you're doing is encouraging the credit provider to mask the true content of the lending agreement in further legalese, to make it even harder to understand. This is totally contrary to the good of the consumer - and, eventually, to the industry at large.

Maybe I should write sears customer service and say "You should fire your customer service people! They're assholes!"

What a response that would get, I'm sure.

at issue is not whether a company makes money, it's HOW the company makes money. many of these practices are deceitful, they are the EXCEPTION in lending, & their practice is frequently outlawed on the state & national level in other types of lending (including other forms of revolving credit).

it's in society's best interest to sometimes legislate the bounds of commerce. if that's populist, then i guess you'll have to come to terms with the fact that you live in a populist country (see: u.s. constitution, article i, section 8, clause 3 & 100+ years of supporting SCOTUS opinions).

Excuse me, but you're a fucking jackass.

*This message brought to you by Americans Against Douchebags*

Elizabeth Warren interview, she describes the war on the middle class by the rich and powerful mega credit card corps.

KILL IT? we freaking murdered that thing long ago in the post 1999 internet IPO debacle and with the Bush presidency.

Just watch elizabeth warren describe how backhanded politics work, including the o so beloved clintons.

My previous point was only to stress the absurdity of a complete non-regulation stance.

@m4ximusprim3: It would be nice to see customers behavior when plastic and cash ( or debit ) are different prices. CC companies have been working for years to make sure the prices appear the same to consumers. I can walk into a gas station and buy the smallest pack of gum and it's probably costing the gas station far more than the item is worth, but according to contract they *must* accept CC's for any sized transaction or net cost to the business.

There's a reason that many geniuses end up committing suicide, and also why the phrase "ignorance is bliss" exists.

You signed a contract, you knew the terms - dont like it? Don't sign up for it. Stop spreading your political propaganda.

@snowmoon:

There's a huge gap between "not fraudulent" and "not fair." Banning fraudulent is clearly correct - banning unfair is a heck of a lot tougher.

@mac-phisto: Agreed. As competition has increased, banks have looked to more and more obfuscated fees to make up revenue they've had to sacrifice in other places ("free checking", for example).

@m4ximusprim3: I don't think you understand how lender make money. All banks report incomes from fees. Check it out, thats not how their entire business is built.

the interchange fee marketplace is...well, it sucks for everyone involved except the networks & the processors. having been on both sides of chargebacks & credit card processing, i can tell you that the only people making out are the networks. both merchants and issuers pay fees to access the system and bear the burden of compliance with laws. meanwhile, the middlemen rake in the dough for playing enforcer.

here we are - merchants blaming issuers & issuers blaming merchants, but both sides are ignoring the elephant in the room. we're all stuck in this network of swiss cheese security & protection payments with our hands tied behind our backs.

i'm starting to suspect that practices i would deem "processor abuse" are widely prevalent, but until transparency exists to determine where & how frequent these abuses are occurring, i don't see anyone making headway into that mess.

@PopulistOutrage: Don't think he said that bro. Might wanna chillax and think it out before you post. I've learned that lesson 'round here the hard way. :P

@m4ximusprim3:

Cause and effect, my friend. Cause and effect.

@m4ximusprim3:

Yup, that's why I'm fine with the legislation. The barriers to entry should be higher, and should never have been this low in the first place. I'm just trying to make the argument that all the joy and pomp over this victory of the evils should be tempered with the sober realities of credit constraints. No free lunch and all that.

And as usual, the inferred story here is that because "bankers" point out the obvious consequences of subsidizing dead beat consumers, we must hate them because they are bankers.

Please fire some of these bloggers, its the same ones who pull this overt political propaganda day after day.

Hold on while I get out my violin. It's in a thimble I left around here somewhere...

@bohemian: It's more likely that government will fall for the "we will donate to your campaign" diversion.

Because that's not reality. It NEVER happens like that. Same with credit. Without some regulation, people will be doing things against their own interests, like using a 75% APR credit card, or driving 95 miles an hour.

@mac-phisto: I have credit cards. I don't keep balances on them now, but it wasn't always that way for me. It was an excercise in belt-tightening to pay them off, but it was well worth it.

Personal responsibility can be a tough pill to swallow at times, but it's worth it.

@mac-phisto: I reviewed my comments to find where I make a reference to the legislation and could not find it. My point is that if the banks want to cut people off because they feel that regulation isn't allowing them to make a profit (or, enough profit [a purely subjective determination that can be made only by them]), they have the choice to simply cut people off and there's not a whole lot anyone can do about it except cry out that it isn't "fair."

I put fair in quotes because it's not something easy to pin down. I don't know what the exact balance should be, but now it's obvious that the CC companies are acting in a way that is not right. The market is malfunctioning as all of the companies race to the bottom of the ethical barrel while increasing their profits. The changes in regulation should help reverse or stop this race to the bottom.

And it's not just the consumers that get the shaft, businesses are basically strong armed into a very difficult situation by allowing any CCs. CC companies have waged a battle to make them the default method of payment forcing businesses to forfeit a percentage of their revenue for the "discount rate" that can change unilaterally as well as "charge backs" that may or may not be fair. The unilateral changes in business rules over the past 2 decades have been more egregious than the changes on the consumer side IMHO.

that's not how the free market is designed to work. "play by our rules or don't play at all" isn't a valid choice - it's a hobson's choice.

credit card banks have had plenty of years to self-regulate with little result. no more!

perhaps you can point me to the provision that would somehow compromise the bank's choice to cut people off. i think i missed that one.

The problem comes when the whining from credit companies is based on "we'll still make money, but not enough for everyone on the board to buy that fourth boat".

I think the truth is somewhere in between those. The fact remains, though, that they are manipulating their systems to do things that any thinking, objective person would agree are not fair or reasonable. It's sad that the entire industry has colluded to the point where you can't just leave a shady company to find a trustworthy one because they are all shady, but once that happens, the only thing that will undo it is legislation.

They have created this situation by pushing it to the point where only legislation will fix it. Whining about it now is just childish.

We have a set of customers. Under our current policies, over the next 5 years, around 25% of them will become bad risks and will have their rates increased by 20%, but we can't predict who those will be.

If we are prevented from raising rates later, we will have to raise rates now. Since we don't know who will become a bad risk later, we'll just increase everybody's rates by 5% now.

I hope the govt. doesn't fall for the "we promise to be good" diversion.

In any case, credit card companies don't really find out when you lose your job, unless you tell them. Instead, they look at your payment history and so on.

@Urgleglurk: The little rounded arrow allows you to respond directly (not being sarcastic).

One thing that is definately a right is that I don't have to use a credit card at all if I so choose.

@tard: but for those people who do pay them back, that option is gone.

Instead they go down to the pawnshop or payday loan place and get a 800% effective 'loan'.

We need to take out the payday loan places first.

Sorry!

@mac-phisto: I don't recall ever seeing a credit card company claim that it's not profitable. It's up to them to decide at what point do they cut people off rather than cut into their profits.

Sources please.

this isn't the first time we've had credit card reform, so i doubt the changes will be as drastic as you claim. give andrew kahr 6 months & i guarantee they'll find a way to double their profitability even with the new provisions & the average APR will still be ~15% - where it's been for 20 years.

don't ever let a credit card company trick you into thinking they aren't profitable.

"Perhaps, if a client isnt worthy of a card with less than 35% APR, they shouldn't have a card in the first place."

Let's say, for whatever reason, the only way for you to get by in the next 5 days is if you take out a loan at %35. Let's say you're waiting on a check to clear, so you know you'll have the money to pay it back.

Do you really want the gov't to take away that option entirely? A lot of people will take those loans and have no way to pay them back (that's why the interest rate is 35% in the first place), but for those people who do pay them back, that option is gone.

HiPwr: True, credit cards are not a right. No one said they were.
OTOH, screwing your customers into the ground with ridiculous interest rates isn't a right either.

@Mary Marsala with Fries:

The "evolution" is to cut off credit to risky borrowers. Profit is risk. If legislation remove the profit, banks remove the risk. Have you tried getting a private student loan recently?

The credit card industry is the most profitable one in the United States with annual earnings in the $30 billion range. Many people might be surprised to learn that a single credit card issuer -- MBNA -- earned 1.5 times more profit than McDonalds in 2004. Citibank, another major credit card issuer, earns more profit than both Microsoft and Walmart.

If its a difficult lending environment, then maybe credit card companies need to lose money this year like a lot of other companies have. But alas, people live and die by their cards and the industry knows that, thats why they can raise rates, increase fees, create fees, cut credit and a myriad other things and get away with it.

Personally, I wouldnt mind a little collateral damage if it would give the credit card industry a good beatdown and a black eye.

@Mary Marsala with Fries:

That's the other fun problem!

The government has provided tons of TARP money to virtually every investment firm. That is free capital provided by taxpayers to increase the lending capacity of the various firms. However, the money wasn't provided on a level playing field - some banks got a lot more than others, and the ultimate proportions of equity available at the firms to collateralize lending were not taken into account by the TARP process.

Therefore, has the government essentially created "winners" and "losers" in this artificial credit market? Will that be counterproductive to any recovery? What are the real competitive effects? Nobody knows, and that's a big problem.

Fortunately that isn't even remotely the case. This bill will hurt the companies who don't evolve, true -- and that's precisely the point. They SUCK the way they are now, so the government, as a representative of the people, is rightfully telling them "evolve or die".

Thankfully the chances are very good that either some of them will evolve (find ways to make money offering credit without using tactics that would make Al Capone blush), or new companies will step in with better ideas.

The big old behemoths who're complaining that forcing them to play fair will mean they take their toys and go home? Are totally welcome to.

@pecan 3.14159265:

Yeah, uhm, that is exactly what any reasonable credit issuer would do. I'm not interested in your life story or personal financial situation, quite frankly. My job is to play the percentages, and if you lose your job expecting your creditors to take no action you're insane.

@tard: Why do you think increasing the rate NOW is a good idea? Yep, let's just make it even harder for someone to pay something off they are obviously having issues paying off now....

@Blackadar:

Joe will not learn to live within his means. Ever. You simply have to accept that.

@Firethorn: Or maybe Joe will learn to live within his means.

Anyone who has read the main provisions of the credit card act (conveniently posted on Consumerist) realizes that these aren't severe, punishing regulations. They're simply meant to take the abuses out of a one-sided agreement and help level the playing field again. In reality, the legislation is simply enforcing the terms of the agreement made when the card was issued and not allowing credit card companies to arbitrarily (and often unknowingly to the consumer) change the terms of the agreement.

Fact: this regulation will increase the average APR charged to everyone and result in even more drastic credit-line cuts than you see today.

It's not a threat. It's not being made of whole cloth by banker lobbyists. I'm not even against the proposed legislation! But that is the fact. Credit cards will be harder to get, more expensive to use, and much less available as a source of emergency funds. Understand that accepting that reality is a consequence of more consumer rights in this area.

Not that this site considers credit as anything more than devil juice, of course.

@Saboth: I mean the customers will suffer!

Certainly they will. The CC company closes Joe Minimum Wage's account because they can't charge 32% because Joe doesn't always pay on time and he has that bankrupty.

Meanwhile, Joe needs some money - so he goes to a payday loan place and pays an effective 400% interest rate.

You have to consider the alternatives.

Credit isn't a Constitutional Right. If the banks aren't making a profit on credit cards, then they should absolutely cut people off.

jstonemo:
Nobody needs a lot of things. Matter of fact, we don't need most of the things in our lives today, they're just really nice to have.

As for relying on credit cards, I tend to use them as a evener - with them I can keep more of my money in higher earning but less liquid assets. Pay them off in full every month so I don't pay interest.

After that, it becomes situational. If you earn enough money - and 'enough' depends a lot on location and circumstances, sure, it can be a bad sign. But what if that emergency is particularly large?

Credit is good used wisely. But a large portion of the population hasn't learned how to use it wisely.

Any more, I think they are screwing over the low-risk borrowers too, because too many high risk borrowers are defaulting.

The higher interest rates are used to offset the losses from the high-risk borrows who default.

That's why low-risk borrowers get all the perks (lower interest rate, cards with better incentives), as they are a steady source of profit.

@Jim Topoleski: It's not just profits vs customers. It's short-term profits vs. long-term profitability. Lots of people in the morgage industries knew that they were making a lot of bad bets. But the rewards were structured in such a way that making a bad morgage was more profitable for them personally (and in the short term) than not making one.

The banks did the same thing with credit card debt... they overextended, sacrificing long term profits for short term personal gain. If they're going to survive as an ongoing concern, there will need to be regulations against this sort of thing. It appears that the "don't screw your customers as much as you have been" clauses are in there mostly to frame the debate for the public.

They need to understand that their profiteering days are nearly over and sensible management of their assets are on top of them, like it or no.

That boy better shut his yap and reread the reformation act, for it will get passed, like it or not.

man screw them banking big wigs...those b@stards DO control everything, and after the economic volcanic eruption they even control government.

now they're pulling strings by saying that if you reform we'll cut off credit, really, you're cutting credit cause you're not getting the extravagant fees anymore, how about you cut a few zeros off your paycheck and help CC holders out a bit for a change. stop raping them for your benefit.

and "when they need it most", I think having too much of it is what's gotten sooo many people in trouble, so people dont need more of IT! and there should be no correlation between the reform and you having to screw with ppls current credit cards!

damn you banking world!

Deregulation was the WORST thing this country has ever done. The regulations existed in the first place because of how untrustworthy these goons where. And time and again they have shown that they can NEVER be trusted to walk the balance between profits and care for the consumer.

People think everyone should have access to credit cards, the same way we thought everyone should be able to get a mortgage 10 years ago. Now we realize, certain simply can't afford a credit card.

Perfect!!!! Credit Card reform retort...and why they need to be able to get away with backhanded tricks. They spend alot of money figuring out how they can short sell their customers, the good ones and the bad ones. The argument I do not buy. What happened to doing business in good faith, with reasonable expectation of a decent profit? Did we kill that off for win at all cost?