The Obama Card

24 May 2009

Author: admin | Filed under: Economy, Government, Politics

images All of us that use our credit cards responsibly and reasonably are going to get our just due; we will be punished. Let’s get used to it. Out of control government has done it again … they are changing the rules and regulations on credit card companies in the name of protecting the public. Sure, it all sounds good. They are requiring better communication to consumers and that is always a good thing.

Here is the good stuff:

1.   Credit Card Companies can no longer retroactively increase rates on card holders UNLESS you are 60 days late on your payments.
2.   Teaser Rates must have duration of at least 1 year.
3.   Promotional rates must last at least 6 months.
4.   Payments for accounts with multiple categories (credit, cash advance, etc) will be automatically applied to the account with the highest percentage rate.
5.   Late Fees cannot be assessed unless the card holder gets the bill at least 3 weeks before the due date.
6.   No over-limit fees unless you agree to it before hand. In other words, when you charge something that takes you over your limit, the charge will likely be denied, unless you have previously agreed to be charged a fee for that privilege.
7.   Minors (under 21) will need parental consent for credit card issuance.

Here is what is wrong:

1.   The credit card companies will respond to these imposed changes to counterbalance their reduced ability to protect their profit margins which allow them to employ their people and otherwise run their businesses.
2.   Interest Rates and fees will be increased as part of the counterbalance
3.   Credit cards will be revoked for those that cannot be carried by the credit card companies due to the rules.
4.   Credit limits will be imposed that will certainly include reduced credit limits.
5.   Credit cards will be less available especially for those with less than perfect credit scores.
6.   Credit will be less available.
7.   Bad for the individual and bad for the economy.

The Perspective

Remember to run away fast the next time government comes and tells you that they are here to help. I have little doubt that those in government have better intentions. However, few of them have ever run a business and / or understand how business or even capitalism even works. In other words they just don’t know what they are doing.

Don’t forget what President Obama said he wants to do; specifically he said that he wants to get the flow of credit moving again. Now reread and think about the above consequences of the actions. I don’t think President Obama is lying. I do think that he doesn’t understand or possibly believe in free market capitalism. This is not the first or the last time this administration and this Congress will enact anti-capitalistic, anti-competitive measures in the false notion that they are protecting the public.

Government this year has acted to:

1.   Protect those facing foreclosure at the expense of those who pay their mortgages on time.
2.   Protect those with poor credit at the expense of those with good or excellent credit.
3.   Protect failing banks at the expense of well run banks.
4.   Protect failing auto manufacturers at the expense of performing manufacturers and all consumers.
5.   Make payments to those who never paid income taxes at the expense of those who pay income taxes.

These poor policies are grounded in the belief that capitalism is the problem. However it is government that is the problem. Capitalism is a natural process. It involves risk, safety, fear and greed; all very human, very natural factors. Over the generations, there is a natural swing between fear and greed, risk and safety. Capitalism is a self-correcting process where fear is responded to by risk takers and greed is responded to by those who seek safety. It’s a dynamic process that involves ebbs and flows, excesses and shortages; it is the natural process.

Government, in the name of help and protection for the common man, consistently gets it wrong by trying to control the individual and businesses (collections of individuals) because they know better how their citizens should behave and what they really need. But what they don’t understand is that their attempts to control tend to distort the natural ebbs and flows of free market capitalism only to create new and often more challenging “unintended” issues.

Individuals need their natural rights and they need to act to reassert their natural rights in the face of an increasingly controlling government.

The credit card legislation is just another example of government losing its compass and its focus as opposed to what it really should be doing as stated in the Constitution.

Oh, one piece of good news. This won’t take effect until 2010.

What do you think? Should Government be more active or less active? Should individuals be more active or less active? Whose rights are being affected and how? Comment on this. Let’s have a discussion.
Arthur Cooper

Tags: Credit Cards, Economic Policy, Economy, Government Regulation, obama, Politics

This entry was posted on Sunday, May 24th, 2009 at 4:34 pm and is filed under Economy, Government, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Comments to “The Obama Card”

Chaplain Winston says: May 24th, 2009 at 6:11 pm

Hi Winston!
Now I’m not jumping to the defense of President Obama nor and I jumping to the defense of Capitalism. Capitalism has spiraled out of control and has met its limitations. Expansion of wealth and power has eaten itself alive. Allies that have taken part in capitalistic notions are falling as well because of the Domino Effect, and have been feeding off each other till all is left is skin and bones. Can these bones live again Ezekiel would ask? Remember the domino display’s on TV years ago? Remember the special effects everyone enjoyed? Well, was it also prophetic? Just look at the special effects!

admin says: May 24th, 2009 at 9:02 pm

Thank you for your reply. There is no doubt that the cycle of greed reached extreme levels in high tech, real estate et al and with the world’s economies highly interdependent on each other, there are related effects. However, I believe that this is part of the natural process that swings from greed to fear and back again.

I suggest that you look deeper and see that those countries such as Singapore, China and many others are deregulating more than regulating their economies and treating capital much better than the US is presently, are prospering.

World History, as far back as the Roman Empire, shows clearly that when the individual is left to his natural rights, human creativity and ingenuity is unleashed and people prosper and benefit in important ways. On the contrary, when natural rights are interfered with or limited and controlled, people suffer.

So, I respectfully disagree with your premise that “capitalistic notions are falling due to the domino effect.” Capitalism is declining because governments are seeking command and control through well-intentioned, but failed ideas that seek to minimize the individual in subordination to the statee.

Thank you for your comments. You are adding to the discussion in important ways.

Julie says: May 25th, 2009 at 1:59 am

I guess what I’m wondering is whether you really feel that the credit card companies should be permitted to continue as they have been. Until now, they have been free to raise rates whenever the mood strikes them with little to no notice to the customer and grant cards to those who cannot pay. As a result of all of this freedom, there are many who will never be able to pay off their debt. I can’t see how that is good for the economy.

admin says: May 25th, 2009 at 3:08 pm

Julie,

Thanks for the comment. No, I don’t think that the credit card companies should be free of regulation. I feel that what they do must be fully disclosed, easily understood by the customer, with proper notice (time frame). Anything that misleads the consumer must be corrected. So you are quite correct in your assertion and I fully agree.

As I stated in my post there are several good things in the bill and they all have to do with disclosure and communication.

But it is true that the credit card companies will respond to the changes as any company would do in response to anything that increases cost of business. They will surely address this in ways that, in my opinion, will raise costs to those of us who pay our bills on time. New fees and fee structures will be developed to respond to the increase cost. Bonus programs will be lessened or eliminated. Credit will become less available as the bar for getting a new card will be raised. Credit limits will be lower.

I feel that this will be ultimately negative for the economy and for consumers.

Your post is greatly appreciated and it serves to highlight the best part of the bill as it relates to communication and disclosure.

Arthur

Harl Delos says: May 25th, 2009 at 7:25 pm

It seems to me that the most important provision was left out of the bill.

You buy something with certain terms understood. The interest rate is 13%, you have to make certain minimum payments. Pull out your pocket calculator, and you find that you’ll have it paid off in three years. You buy it.

Then you mail a payment on the 3rd of the month, and they don’t credit your account until the 25th. It was due on the 15th of the month, so they charge you a $46 fee, and raise your interest rate to 30%. All of a sudden, you’re not paying for three years, you’re paying for ten.

That’s dishonest. It’s fraud. Credit card companies should be required to process payments immediately, and to honor their original interest rate unless you consent to paying a higher rate by buying something else. Neither provision is in the new bill.

Making them wait a few weeks before they raise the rates is equivalent to making it legal to rape women - as long as you hold them down for five minutes before you tear off their clothes and penetrate them.

If circumstances have changed since you initially incurred that debt - such as getting diagnosed with cancer, or being the victim of a drunk driver, or having your employer go out of business because the CEO embezzled funds - you may not be able to get another card at better rates. Everybody else has to live with “a deal is a deal”, and it’s not unreasonable to demand that credit card companies live with the deals they make.

Constance says: May 25th, 2009 at 10:09 pm

I lived in Canada for 35 years and most of those regulations that President Obama is proposing have been in place there for years. I’ve had to learn the hard way since I moved back here how ruthless the banks and credit cards can be. I think we’ll see that those changes only strengthen us as a society since they begin to reframe the way we relate to each other. In the long run, learning to accept ourselves as interdependent and not individual entities that can do whatever we want without consequence will do more for the growth of the United States: growth in all senses; the economy; socially; and spiritually. the world is changing and we cannot stay as we have been, thinking we can do whatever to whomever without consequence. I think we’ll find that giving up some of that hard edge will benefit all of us in ways we can’t even imagine.

admin says: May 28th, 2009 at 2:43 pm

Well, like I said, I am in favor of the better notice, communication et al. However, I still believe that this will restrict credit for many, especially those with lesser credit scores and that works against Obama’s stated notion that he wants to get credit flowing again. Everything has a cost.

Thanks for your comment and participation in the discussion.

Arthur

admin says: May 28th, 2009 at 2:47 pm

Harl,

Thanks for your comment. The example you provide is certainly not covered in the bill as far as I can tell. I too have experienced late fees but in all cases I have been able to get it reversed by calling their customer service. Of course, this shouldn’t happen in the first place. If you play by the rules you shouldn’t have to fight when the credit company gets it wrong and gets it wrong repeatedly.