I just love it when the credit card industry threatens to take its toys and go home.
That, in effect, was what card issuers said in response to the announcement by federal regulators last week that they planned to crack down on some of the industry's more consumer-unfriendly practices.
To increase fairness, the Federal Reserve and two other agencies would, among other things, require card issuers to mail out statements at least 21 days before a payment's due date and prohibit issuers from applying partial payments only to balances with the lowest interest rates -- thus leaving costlier, higher-rate balances intact.
Edward Yingling, president of the American Bankers Assn., said in a statement that the Fed's proposals represent "an unprecedented regulatory intrusion into marketplace pricing and product offerings."
He said the measures would "result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards."
In other words, if the industry had to play by the proposed rules, it wouldn't be able to offer as much plastic to as many people.
Nonsense. No amount of regulation has ever resulted in card issuers scaling back their offerings. More than 5 billion solicitations were mailed to U.S. households last year alone.
But if banks suddenly decided not to make plastic as readily available to people with spotty credit records, fine. All things considered, that would probably be a good thing.
Just ask Victoria Ramirez. The San Jose elementary school teacher once had as much as $45,000 in debt on six different cards.
Now she and her husband have whittled that down to a balance of about $10,000 on a single card.
Ramirez, 37, said card issuers make it all too easy to get into trouble.
"They loan you a big amount of money that you can't take care of," she said.
This isn't so different from what's happening in the housing market. One reason so many people are in danger of losing their homes right now is because banks handed out high-risk loans to folks who had no business getting deep into debt.
To be sure, many such loan recipients deserve a share of the blame for being so reckless with their personal finances. But they wouldn't have gotten into trouble without the willing complicity of lenders, which encouraged virtually all home buyers to take the plunge, regardless of their ability to repay loans.
