Benny and his friend Griffin at Ocean Beach in San Francisco.

Wednesday, May 13, 2009

Prudent practices

So the American Bankers Association is getting all nervous now that the Senate has the credit card reform act. They've sent a letter to the Senate detailing how a financial apocolypse will scour the land if they can't switch due dates and hike APRs for no reason. They've been playing a fun game of "gotcha" with consumers, those credit card companies, and made tons of money off responsible people in the process.

Here's an excerpt of the letter also posted on

ABA recognizes that the Senate bill contains a number of important consumer protections embodied in recent regulatory action, and acknowledges that change is forthcoming in the way the credit card industry and its customers interact. However, we strongly believe that any legislation in this area needs to achieve the correct balance of consumer protections and market flexibility so as to not jeopardize access to credit.

ABA remains very concerned about the contents of H.R. 627 (as amended), and believes that if it is enacted as it currently stands, it will have a dramatic impact on the ability of consumers, small businesses, students, and others to get credit at a time when our economy can least afford such constraints.

The bill contains various provisions that limit a lender's ability to manage risk, price fees, allocate payments, and otherwise prudently conduct business. We believe these limits will necessitate reductions in available credit given current economic conditions, while increasing the price of credit where it remains available.

Prudent? Prudent? The lenders dare to use the word prudent? They have been anything but prudent in their behavior. It's like the Wild West out there in the financial sector. They are the ones who so prudently gave tons of credit to every meatball with a pulse. They are the ones who are jacking up every APR in sight for good customers in the name of prudent business practices. Switched due dates, double billing cycles, these are not prudent business practices.

Rail all you like about imprudent consumers who run up credit card debt, the reality is these people have this debt now and many have stopped spending and are trying to pay it down. Will it really benefit the economy to smack these consumers around some more? These are the same lenders who needed a godawful amount of time to to adjust to new rules effective next year and instead used this time to shove through every nasty business practice they could think of before the deadline. They certainly moved quickly on that.

And as for the reductions in available credit they go on about, that's a GOOD thing. There's still way too much credit out there, that was the problem. I feel for small businesses who depend on credit to keep going, but since when did the economy require underhanded tactics by credit card companies to prop up healthy small businesses?

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