Changing Perspectives

Since the early 1980s, most of the proposed changes for consumer credit have been aimed toward making the market work better by giving the consumer more information.  The credit industry has resisted mightily, including fighting to the death over such modest proposals as disclosing the length of time it would take to pay off a card.  Sure, there were some academics who argued that more disclosure was useless (no one can understand the current disclosures), but better disclosures seemed to be the only possible improvement in a world dominated by faith in the perfection of markets. 

Yesterday might be a good day to mark on the calendar.  A new voice rose to say that it is time to talk about new regulations on credit cards.  Senator Carl Levin, D-MI, spoke at a conference on debt at the Center for American Progress.  As he celebrated Ronald Mann's book, Charging Ahead!, the senator went on to say:  “Education . . . I’m afraid, isn’t going to be enough.” Stressing the need for new legislation and regulation, he continued, “Without that club, without that stick, we’re not going to see reforms coming.”

One might have predicted slow changes to the rules governing consumer credit--first a few small disclosures, then a few more disclosures, then some modest regulation, etc.  But before there has been any measurable movement toward meaningful disclosure, here comes a powerful US Senator shouting the R-word. 

Sure, no one is voting today for a host of new regulations, and there are probably still a lot of senators and representatives who would cough up a hairball if they had to vote for a new regulation.  And any real change has to weighed against the political reality that the credit industry still has more money and more lobbyists than dogs have fleas.  We could even talk about the politics of why consumer credit is suddenly a hot issue.  But for those of us who conduct studies and make policy proposals, the regulations that were non-starters a few weeks ago have become hot new ideas today.