Angry Physicist

New Limits on Credit Card Companies: Is Hell Freezing Over?

<i>By limiting banks' ability to manage risk, regulators would be forcing the institutions to withhold credit, raise interest rates or eliminate such programs as zero percent balance transfers to compensate for it, industry officials and analysts said.</i>

That is a heaping load of pure bovine scatology.

The issue is not managing risk---it is stopping clearly deceptive practices. It is preventing bank's ability to fool customers into thinking they have a good deal when they don't. Nobody would stand for it if buying a car was infiltrated with such flim flam, even if there was an impenetrable 30 page "disclosure" form. Banks love disclosure requirements because they can stuff absolutely everything in there from the mundane to really critical, and nobody can discern which is important and what is legalistic mumbo-jumbo.

Banks will have the ability to price risk the old fashioned way: credit lines and interest rates. Sure, the front page interest rates will likely go up---and this means that the cardholders will have much clearer ways to compare one offer from another. They will go to the bank that actually does offer them the best deal, not the footnote-encrusted best* deal***.

That's the real reason some banks don't want this, as they will have to face honest competition and consumer pushback. Of course, all banks will be in the same position, and honest nicer ones should approve this move.