What will happen when Congress passes and President Obama signs the pending credit-card legislation?
Probably everyone will pay higher interest rates on cards in the first place, and some people will be denied cards who otherwise would have got them. And where will those people turn when they can’t get credit through their credit cards? As The Onion has explained, their only choice may be a loan shark — who will be unconcerned with federal legislation and rather less pleasant in his collection practices. This will be especially so in states, such as mine, that have banned “payday lending.”
Sure, probably fewer people will go to loan sharks than would have run up debt on cards, since the loan shark is less convenient and the penalties for late payments perhaps more obvious. But those who need short-term credit (and remember, very short-term credit on a card is free) will be deprived of a much safer, more consumer-friendly option.
There are reasons why a fully free market might result in less credit-card issuance and use, but adding more legislation on top of our current system only infringes on consumer freedom and, contrary to the politicians’ supposedly good intentions, may expose the most vulnerable to more risk of serious harm.