Current analysis of economic conditions in the United States centers on the need for businesses to obtain financing. Tight credit is supposedly the root of our current economic recession. America, so we are told, runs on credit. At the same time, we are told that consumer debt is a serious threat to our economic health and should be avoided. Credit card debt, so we hear, is a huge problem for most American households.
Can anyone see the conflict in this message?
It’s okay for General Motors or Chrysler or AIG or any other company to amass huge amounts of debt. After all, debt – dressed up as financing – is essential to the life of American business. It’s okay for a business to incur debt, but not okay for an individual? It’s okay for the federal government to borrow billions from China, yet not okay for the consumer to borrow thousands from MasterCard?
If American consumers can’t borrow their way out of debt, chances are, the federal government can’t either.
Showing posts with label credit card. Show all posts
Showing posts with label credit card. Show all posts
Thursday, April 09, 2009
Wednesday, April 01, 2009
Time To Regulate Credit Card Interest Rates
The Obama Administration has used every means available to impose tighter and tighter regulations on companies receiving Stimulus Funding. In the financial industry, they have sought to limit executive pay and eliminate bonuses. In the automobile industry they have used federal assistance as leverage to restructure General Motors, even ousting officials elected by General Motors’ stockholders. Most recently, some in the administration have suggested the government should regulate salaries of all executives in all industries. But one thing they haven’t sought to regulate is credit card and consumer loan interest rates.
Over the past twenty years, the banking industry has lobbied for increasingly favorable rules controlling the interest rates they are allowed to charge for credit card debt. As a result, in some states interest rates are unlimited. In addition, banks and credit card issuers are permitted to tack on fees and late charges and they are permitted to increase interest rates for customers who, though current at the time, fail to meet certain criteria not directly tied to their account.
Not satisfied with that, in 2005 after years of intense lobbying, banking officials convinced Congress to tighten bankruptcy laws to prohibit consumers from liquidating credit card debt. Now that many in the financial industry have run the banking sector into the ground, imperiling the U. S. and the world, these same companies turn to Congress for assistance.
In the past 12 months, the federal government, through one agency or another, has pumped trillions of dollars into the banking industry. Banks have received generous injections of capital, either through the sale of preferred stock or loans from the Federal Reserve, at all but an interest-free rate. Every dime of that money is taxpayer money. If banks get all of this free of charge, why are consumers forced to pay usuriously high interest rates?
Over the past twenty years, the banking industry has lobbied for increasingly favorable rules controlling the interest rates they are allowed to charge for credit card debt. As a result, in some states interest rates are unlimited. In addition, banks and credit card issuers are permitted to tack on fees and late charges and they are permitted to increase interest rates for customers who, though current at the time, fail to meet certain criteria not directly tied to their account.
Not satisfied with that, in 2005 after years of intense lobbying, banking officials convinced Congress to tighten bankruptcy laws to prohibit consumers from liquidating credit card debt. Now that many in the financial industry have run the banking sector into the ground, imperiling the U. S. and the world, these same companies turn to Congress for assistance.
In the past 12 months, the federal government, through one agency or another, has pumped trillions of dollars into the banking industry. Banks have received generous injections of capital, either through the sale of preferred stock or loans from the Federal Reserve, at all but an interest-free rate. Every dime of that money is taxpayer money. If banks get all of this free of charge, why are consumers forced to pay usuriously high interest rates?