New Standards of Decency for Credit Cards

Article excerpt

By the time you read this, the Senate may have passed a bill to put a leash on the nastiest credit-card company tactics. Lenders warn that changing the rules would make it harder for people to get credit.

And a good thing that would be. Rest assured, weAEll all adjust.

The House has already passed its own credit-card legislation, and it, too, will curb some of the most evil practices cooked up by financiers. At the top of the list is the ability of lenders to up interest rates on money already borrowed.

The latest Senate bill still lets credit-card companies get away with a lot. For example, there are no limits on the interest rates they may charge, though some Democrats have been fighting for a cap. The companies can raise rates on new balances, though they have to give 45 daysAE notice.

The American Bankers Association argues the new rules will pass risk onto responsible borrowers. "People who manage their credit card will end up having to pay for people who donAEt, people who donAEt repay their loans," says an ABA spokeswoman, Nessa Feddis.

No, they donAEt have to pay, because they donAEt have to borrow if they donAEt like the terms. So when VultureCard tells Ms. Monthlypayer that her interest rate on future unpaid balances will jump from 18 percent to 29 percent, she can tell it to take a flying leap.

If VultureCard wants to keep Ms. Monthlypayer on its hook, it has alternatives to goosing her already high rate. It can stop fishing for poor credit risks. Other lenders would love to have Ms. Monthlypayer and her responsible ilk.

Feddis further complains that "the bills and rules restrict the ability of card companies to adjust to changing environments, to changing risks."

Actually, she has it backward. The regulations change the environment on purpose. …