Outside editorial: Breaking up the card game

Posted: Tuesday, May 26, 2009

We're all for cracking down on credit card practices that surprise customers with outrageous fees and such.

But as the federal government more and more micromanages the economy with more and more laws, the danger is that the law of unintended consequences will kick in.

In the case of the credit card customer's bill of rights, which the president signed on Friday, it should make some practices fairer for borrowers. As for criticism that it will make credit harder to get - that's not necessarily a bad thing. We've gotten drunk on borrowing as a country. It's time to sober up.

Yet, consumer spending has become 70 percent of the economy - and if spending is made more dicey through tighter credit, the hoped-for economic recovery could be crippled.

"The bill may stop various forms of abuse, but it will also stop some various forms of credit," New York University economics professor Andrew Caplin told Bloomberg News. "If the economic recovery is going to rely on consumer spending, it will be a long wait."

Others fear that maxed-out cardholders will get increased protections and lower late fees from the bill, but that responsible cardholders will only get socked by new and increased fees that card companies institute to compensate for the law's impact on them.

Retailers with their own credit cards may also get hit by less freedom to charge late fees on delinquent customers.

Opponents of President Obama's mortgage bailouts - who complained that it was irresponsible borrowers who would benefit - may come to see the same fault with the new credit card law.

Still, as one observer has noted, "the credit-card industry had been the Wild West and now the sheriff is coming to town."

We just hope the sheriff knows what he's doing.

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