From The Law Of Unintended Consequence Department

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.

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