An Experiment in Scotch

Back in May, Con­gress passed a bill that pre­vented credit card com­pa­nies from rais­ing inter­est rates for card­hold­ers unless the cardholder’s pay­ments were 60 days over­due. They did this under the guise of pro­tect­ing the con­sumer against the capri­cious and evil credit card com­pa­nies, appar­ently for­get­ting in the process that credit card com­pa­nies and con­sumers enter into an agree­ment where each side sup­pos­edly gets ben­e­fits. Con­gress, in its all know­ing wis­dom, didn’t make the law effec­tive imme­di­ately and instead set it to be active in Feb­ru­ary of 2010. I’ll give you 2 sec­onds to fig­ure out how that worked out.

If you guessed that the credit card com­pa­nies, fore­see­ing a future where they can’t con­trol the inter­est rates they charge cus­tomers, decided to go ahead and start jack­ing up inter­est rates now, some­times very egre­giously, then you win the prize of the week which just hap­pens to be my undy­ing grat­i­tude for read­ing my blog. Yes, you already had that but let’s pre­tend you didn’t so we don’t both feel robbed. Any­way, as usual when our esteemed col­leagues in Con­gress do some­thing on our behalf, it hasn’t turned out so well.

I don’t have any doubt that credit card com­pa­nies often­times act in ways that are non-beneficial for con­sumers but the beauty of it is, con­sumers don’t have to have credit cards. The eco­nomic col­lapse that hap­pened last fall was already caus­ing many con­sumers to reduce their debt load. Now, in their infi­nite wis­dom, our rep­re­sen­ta­tives have made it more dif­fi­cult to con­tinue on that path by arti­fi­cially affect­ing the mar­ket in a mis­guided attempt to “help”. The Demo­c­ra­tic reps who spon­sored this bill are now cry­ing that this is exactly why the bill was needed, miss­ing the appar­ent irony that with­out the bill, this wouldn’t have hap­pened. Credit card com­pa­nies are busi­nesses which means they strive to make prof­its. Like all busi­nesses, they need to have a way to pro­tect them­selves from bad cus­tomers. If you steal some­thing from Dillard’s, they pros­e­cute. The sad thing is, if you steal some­thing from Citibank, e.g. you run up a bal­ance you can’t afford, Con­gress passes a law that pre­vents Citibank from pun­ish­ing you. Makes total sense.

Con­gress seems to think that have a credit card is a right instead of the priv­i­lege it actu­ally is. By med­dling in the mar­ket for credit, they have cre­ated a sit­u­a­tion that is exactly the oppo­site of what they were try­ing to cre­ate. Unsur­pris­ingly, this hap­pens all the time. Some day, maybe we’ll fig­ure that out and ask them to stop “pro­tect­ing” us and just leave us alone.

Thanks to Randy for the link.