SNL recently did a great skit called “Don’t Buy It If You Can’t Afford It” and it’s on YouTube somewhere.

The legal rate…ought not be much above the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent, the greater part of the money which was to be lent would be lent to prodigals and projectors [promoters of fraudulent schemes], who alone would be willing to give this high interest….A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it.

When the legal rate of interest, on the contrary is fixed but a very little above the lowest market rate, sober people are universally preferred, as borrowers, to prodigals and projectors. The person who lends money gets nearly as much interest from the former as he dares to take from the latter, and his money is much safer in the hands of the one set of people than in those of the other. A great part of the capital of the country is thus thrown in the hands in which it is most likely to be employed with advantage.

I agree with both James and MBH.

I think credit cards and the use of them are traps, yet I think any company has the right to sell to suckers.

It is not the responsibility of Govn’t to oversee that people do not get into debt. It is the individuals responsibility to not get into trouble on their own, and if they do, pay the price.

However, it is also a fact that a majority of credit card users “lose” at the credit card game, and a majority pay interest charges, get in deeper, and are hurtling toward disaster.

I think the solution is for people to wake up and pay attention, which likely won’t happen. Collectively, people are dumb. That is why credit cards exist in the first place.

If people stopped using them, they would go away on their own.

In fact, when the second wave of economic calamity hits next year…yes it is coming and no, the worst is not behind us…you will see mass exodus against unsecured debt payment.

The CC meltdown is next.

Just wanted to respond back quickly.

Its not ethical, reasonable or appropriate for business to harm their customers. To argue that its okay for businesses to harm people is like saying its okay for people to kidnap others off the street and sell their organs – its an extreme example – but you can’t ethically concede the point. Otherwise, its moral cretinism.

Now, if an individual chooses to harm themselves thats a different question.

Regarding the importance of credit cards – you’re basically asking, don’t people really need them? Great question. Elizabeth Warren had a really excellent analysis a couple of years ago. In it she argued that the root cause of the need for credit cards was declining real wages and increasing real costs of housing and health insurance. Thus, consumers are in a sense, forced to used credit cards, simply because they can’t earn enough to make ends meet.

Also, the notion that people need a credit card for car rental, to buy a plane ticket, build up credit, etc etc – is absolute nonsense. A credit card is not needed. Maybe you need some form of electronic payment, but it doesn’t have to be a credit account.

Also, while I am writing, I think the banks have gotten entirely too big for their britches. I think they’ll do their absolute best to block reforms that are consumer friendly and instead pass protectionist legislation. Plus many credit card companies can charge effective interest rates that are in the range of 29% to 100%. Then their CEO’s get in front of congress and say that everything is okay and they aren’t harming anyone. The arrogance and degree of hypocrisy of big finance is stunning. Its Stunning and I think insulting to any reasonable sense of fair play. I sincerly hope the Obama adminstration takes big finance to the woodshed and gives them a sound regulatory beating. They certainly deserve it.

And no store should be allowed to increase the price of milk in case someone can’t afford it.

And of course we should have laws banning large vehicles that damage the environment, And McDonalds should not be allowed to supersize our fries – that’s harmful. etc., etc.

Letting the government role grow is a slippery slope to full-blown socialism.

Perhaps credit card companies should be forced to explain double-cycle billing in clear language, but I don’t think they should be prevented from selling products that use it.

The nanny state is growing in Europe and we should resist it in the US.

Michele: I didn’t say that I wasn’t affected. We’ll all see the effects from this.

James: Thanks for stopping by! A few comments for you.

When you talk about “situations of dependency,” isn’t that what you _want_ with a business? Don’t you want your customers coming back for more of what you’re selling? I would.

As for your “harm” comment, there’s an easy way not to be harmed by CCs: don’t get one. Or if you get one, don’t charge anything on it. Or if you charge something on it, pay the bill, in full, by the due date. Any harm that comes to people’s marriage, their children, or their financial freedom is the result of them (a) carrying a balance, and (b) not paying their bills on time. It’s not the CC company’s job to be your mother. Its job is to fulfill financial transactions to merchants on behalf of customers, and to profit by doing so.

The problem with having strong legislation like this is that if you prevent too many people from failing, you also prevent a lot of people from succeeding. Forcing CC companies into situations where their most profitable customers are no longer as profitable raises everyone’s costs. Rates go up, limits go down, annual fees come back, rebates go away, to protect the people on the margin who are unable, or unwilling, to use their cards responsibly. Almost everyone’s standard of living takes a small hit when there are price controls. It’s unavoidable.

This is James from Dual Income No Kids.

An adequate criteria for government intervention in the economy is to prevent harm.

Many of the practices of credit card companies are designed to “fee harvest” or “create situations of dependency” that is the fees and interest calculations are designed to keep the borrower in debt.

This is harm. Pure and simple. Its harming peoples ability to care for their children, its contributing to marital disharmony, and its harming peoples ability to achieve financial freedom.

Its is therefore well and duly appropriate for government to intervene to prevent this harm.

Respectfully, MBH, runs a very excellent blog, but in this case, I strongly disagree with him. This legislation cannot come soon enough or be strong enough.

It is long overdue.

-James Carl Hendrickson