Blaming the Victims of the Credit Card Companies

United States Senator Chris Dodd of Connecticut has a great idea: put an interim freeze on credit card fees and rates until the new Federal regulations take effect on February 22. Those regulations, through a law passed in May, seek to stop banks and other credit card issuers from arbitrarily raising the interest rates, fees, and charges on cards.

Not surprisingly, the representatives of the credit card companies at once expressed strong and vigorous opposition to any interim freeze. Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable, which represents large financial institutions, immediately opposed Dodd's proposed bill to freeze rates,

claiming that the proposal was based on a "faulty premise that credit card rates were going up because of legislation" according to the New York Times of October 27. Instead, Talbott stated, "interest rates were rising because of risks posed by the unsteady economy and by card holders themselves, who are defaulting on their payments or paying late more often" also according to the Times.

Aside from the fact that the ship of higher rates and worse terms has already sailed from its financial harbor, doesn't it seem unconscionable to blame the victims of the always-pernicious credit card companies for being forced into more late payments and even defaults? They are the victims here -- we've all been victimized for decades by the abuses of the credit card industry, going back at least to the removal of interest rate limits and other controls in the 1980s.

It is very poor financial managementto use adverse changes in rates and terms, allegedly due to the financial problems of many card users, to make those same financial problems even worse through even worse terms. That is comparable to treating the common cold by giving its victim the H1N1 flu. For the credit card companies to make late payments and defaults even more likely by worsening card terms produces exactly the result they, including their Scott Talbott, say that they want to avoid.

During my decades of teaching Money and Banking at various colleges, I would have given the position and economic reasoning of the credit card companies a grade of F-. But, then,to those who have no conscience and who seemready to punish the victims of the economic crunch by further victimizing them, perhaps such abuse makes sense. It obviously makes little sense to Senator Chris Dodd, hence his proposed legislative interim freeze on credit card rates and fees. We should do everything possible to encourage such badly-needed legislation and to help get it passed speedily by Congress.

It's high time to stop blaming the victims and start blaming the sources of credit card abuse: the issuers of those cards themselves.