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Future of Credit Card Regulation

posted by Katie Porter

Capital One's 10-k Annual Report securities filing contained this little nugget: "The current Congress is holding hearings on credit card practices of various kinds, including fees, marketing practices, and changing customers' interest rates, but most analysts believe the prospects for broad legislation range from uncertain to unlikely." In fact, a hearing on credit cards was held today, April 26th, before the House Subcommittee on Financial Institutions and Consumer Credit. Are members of Congress merely providing a venue for the "airing of grievances"  (aka Festivus) or is Congress serious about credit card reform? Only time will tell, but given the typical caution with which companies make assertions about future events in their securities filings, I wonder if Capital One's famed statistical model for future credit performance can accurately predict Congressional action/inaction as well. Capital One has seen its delinquency rate fall from 6.12% of total loans in 2002 to 2.74% of all loans in 2006, with a sizeable and steady reduction in every year. Are they equally adept at managing the risk of adverse legislative activity?

The Capital One Annual Report contained another interesting comment. In the identification of risk section, Capital One listed "social factors" as a risk to Capital One's business. Specifically, the company noted that social factors such as "changes in consumer confidence levels, the public's perception of the use of credit cards and other consumer debt, and changing attitudes about incurring debt and the stigma of personal bankruptcy" could cause changes in credit card use. First, I want to express my doubt that the "stigma of personal bankruptcy" is particularly volatile. Nobody has ever proven that stigma has declined, in my opinion, other than by reminiscing about the "good ol' days" when they think that debtors felt terrible or by suggesting that because filing went up, stigma must have decreased. Second, I think mention of the public perception of credit cards is fascinating. Co-blogger Angie Littwin has ongoing research on how very low-income borrowers perceive different types of credit, including credit cards and why negative perceptions about a credit product may not track decisions to actually resist the use of such products.


Many fundmentalist Christians quote that Bible verse ,"The wicked borrow, but don't repay" when talking about bankruptcy.
I don't believe most people who file are wicked. Who really are the wicked ones?
One of Capital Ones Vice Presidents did an interview that appeared online a couple years ago.
He said the newly bankrupt was "itching to get their mitts on plastic and would swallow high interest to get it."
It wasn't surprising to me when Captal One flooded my mailbox with offers of credit shortly after I filed for bankruptcy. I am not itching for plastic.
Capital One is itching to get my money, but I don't want them or any of these predators in my wallet.
I try to stay away from EVIL as much as I can!

That Proverb about the wicked not repaying their debts is only one scripture. There are many that talk about money and debt. The problem is that this Proverb is misused by many Christians. If they read the whole Bible they'd see that the advice the Bible gives is to avoid borrowing in the first place. Unfortunately, in today's society that is difficult because we have a culture that lives beyond our means as a standard. Those of us who learn to live on what we make can avoid these evil predators that are out to enslave people for profit, and end up creating more poverty and eventually a failed monetary system.

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