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A Devil's Advocate Takes a Turn at Credit Card Companies

Monday, May 04,2009 10:18 PM

In the Los Angeles Times, a brave writer took a stab at defending the credit card companies in an article entitled "Credit card companies as evil villains? It's not that simple". In fairness, he first explains that there are many things wrong with the practices of these companies or - as he puts it - their "genuinely sleazy behavior":

They shouldn't be allowed to jack up the interest rate on card balances retroactively, except in rare cases. They should apply your payments to balances with the highest rates first. They shouldn't accept charges that put you over your credit limit and trigger a fee, if you request such a hard cap. And they should be barred from marketing directly to young persons. Cards used to be hard to get if you had no credit history.

True enough. Then he gets into what we shouldn't be slamming them for:

Certain purported sins, such as raising rates and cutting credit limits for some borrowers, merely ratchet back the loose standards that helped lead us to economic perdition.

Hmmm. Okay. And this:

The sad fact is that rising unemployment produces credit stress. Under the circumstances, tightening credit standards seems like a judicious precaution.

Especially, as he points out, when the taxpayers are hoping that all that bail out money will be paid back. Now, the part about credit limits actually makes sense. Keeping credit limits high seems silly in this economy, almost double dog daring people on the edge of trouble to use as much as they can before the inevitable end: bankruptcy. But I don't really agree with the interest rate jacking. People on the edge of trouble will fall right into real trouble when their payments go up astronomically. And while it would be nice to teach someone with "six maxed-out Visa cards" a lesson, ultimately he will default and the lesson will be left for us (the taxpayers) to shoulder. Anyway, it's a good read and nice to hear a little defense of reason in some areas of this debate. My favorite part of article is where he talks about why the credit card companies can't adequately defend themselves:

Because of their unsavory past, the issuers are unable to make this case for themselves. They remind me of some frat guys at my college who were guilty of only about half the things they were accused of, but what was true was bad enough. From them I learned this tenet of the court of public opinion: Once you've been caught firing guns at African American students from the frat house roof, no one will believe you're innocent of anything.

Read it here: http://www.latimes.com/business/la-fi-hiltzik4-2009may04,0,1664797.column?track=rss