Thursday, November 19, 2009

Government Failure: Credit Card Regulation that Makes Our Lives Worse Off, Part II

A symbol of this administration's creeping regulatory ineptitude.

Last August I wrote a post on how a new credit card regulation would hurt responsible credit card users, people that pay their bills on time and that occasionally use credit cards to borrow for short periods in order to avoid the cost and trouble of opening new lines. I explained how one of my credit card administrators reacted to the new regulation by making my credit more expensive, in other words by making sure that responsible users would pay for other people's irresponsibility.

Anybody with minimum knowledge of economics should have been able to predict this negative regulatory outcome. The government however wasn't able to predict it, or even worse, chose to not disclose the negative consequences of the regulation.

Now it's my other credit card administrator that finally throws the towel. This card has offered me low and fixed interest rates for more than 14 years. Rates never changed, not even once. Aaaaaand it's gone! Here's the meaning of change we can believe in according to my credit card administrator (italics are mine):

For many years, our credit cards have featured a fixed interest rate. However, some provisions of the new credit card legislation (meant to protect consumers from card companies that advertised low fixed rates, only to immediately switch to high rates) apply to all credit cards with fixed rates. So that we can continue to provide reliable access to consumer credit under all interest rate conditions, we believe it is now prudent to change the way the Annual Percentage Rate (APR) is calculated for your card. ...

While this change is not likely to have any immediate impact on the card interest rate, should interest rates rise in the future, the rate could increase.

In the name of helping me, help that I didn't even ask for, the government made my life worse one more time. Regulations like this should never leave the trash heap of bad ideas where they come from.

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