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July 20, 2010

  • News:  CCARDA Protections Circumvented -- Good or Bad?

    There seems to be no easy answer. Of course, the concept of credit card consumer protection is good. However, the ever-present fear that goes with sweeping change is the unintended consequence. That seems to be case here with credit card protections. No one doubts that consumer abuse had gotten excessively out of hand. To no one’s surprise the banks all cried "foul". They warned of resulting woes and side-effects that could hurt credit card consumers in the end. Generally, this two-pronged counter-attack was regarded as hyperbole and spoof. Certainly, this was a component but, perhaps, some of this foreboding had substance.

    The first prong was that the public would be highly restricted from access to credit cards at all. The second was that the large credit card lenders could be faced with financial destruction. Largely, the public winced their eyes and braced for the first hailstorm. It came quickly as millions of accounts were either closed or cut back to almost nil. The public hope was that the lenders would eventually bow to free-marked demand and, over time, restore accounts back to where they were. Some consumers changed their lifestyles to simply live with these changes. Probably most, however, were like myself and already had more accounts open than they really needed (I had 35 at the time). Having some of the unneeded accounts closed was actually a convenience. Granted, the former good deals went away but, as we expected, over time they started coming back.

    So, the first prong of threat kind of fizzled for most of us. The second one, however, is bearing down on us now and is not going away anytime soon. When the economy came crashing down at close of the Bush policies, the credit card industry was immediately overwhelmed with astronomical charge-offs (uncollectible defaults). All the reserves were immediately drained and a financial black hole formed that would suck in any further revenue into nothingness. Corporations, no matter how big and powerful, can only survive that just so long.

    Life for the credit card consumer, however, wasn't faring much better and consumer protections were necessary. Although good for the consumer, they were bad for the provider. Face it, our nation needs both healthy consumers and healthy institutions. The extended series entitled "CCARDA Protections Circumvented " will expound on this in further detail. Please read on.

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