Tuesday, January 11, 2011

Those Unintended Consequences Again

Last year, I wrote about the foreseeable "unintended" consequences of new laws regulating credit card fees--higher credit card fees. It turns out there's no end to the mischief caused by the Obama Administration's implementation of that law:

NJ.com, January 5th:
Two big banks, Chase and Wells Fargo, will begin phasing out traditional free checking in New Jersey next month. Consumers can avoid monthly maintenance fees, however, if they meet minimum balance requirements for the account or set up direct deposit.

"The trend is moving away from free checking," said John McWeeney Jr., president of the New Jersey Bankers Association.

New federal banking regulations, the cost of complying with those rules and a reduction in fees banks can charge customers will change the financial products they offer, bankers say.
Wall Street Journal, December 31st:
The Credit Card Act signed into law last year was supposed to stop financial institutions from sleazy antics. But instead, some retailers say, it may restrict stay-at-home moms.

Dress Barn Inc., Home Depot Inc., Citigroup Inc. and other companies are urging the Federal Reserve to drop a proposed rule that would require credit-card issuers to consider only a borrower's "independent" income rather than household income. The new standard, which would apply to new credit-card accounts and requests to increase limits on existing accounts, could make it difficult for some customers to get credit on the spot, especially stay-at-home moms.
As Megan McArdle says:
All of which goes to show how hard it is to craft legal rules that will produce even a relatively well-defined outcome. We know what the framers of this legislation wanted: they wanted to prevent credit card companies from targeting relatively affluent kids . . . kids like, say, their kids . . . who might take those credit cards and get themselves into trouble running up bills they couldn't pay. But how do you actually do that? Credit card issuers need a solid rule, not a vaguely worded admonition not to let affluent kids get into too much trouble with their first Amex.

You can't just make it illegal to give credit cards to college kids--there are a lot of college kids who work full time and pay their own way. Nor can you simply target an age range, since there are a fair number of self-supporting twenty-year-olds out there who would be justly outraged at being denied credit. So instead, they targeted income--and accidentally denied credit to the housewives.
Further evidence for benefits of the free market over unobtainable "cosmic justice" (as Thomas Sowell writes).

Not that lefties care. I agree with WyBlog: "When it comes to liberals, progressives, and feminists, intentions are what matter, not actual results."

(via TigerHawk)

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