Feb. 26, 2005, on this blog: Of blood and stones
I expect this legislation to accomplish only half of what it claims. By that I mean that I’m confident it will succeed in hurting the people it is intended to hurt, but that it will fail to help the corporations it is intended to help.
The credit card industry is overextended. Somewhere along the line they got so giddy with their growth in revenue and share price that they forgot that not everybody constitutes a good credit risk. That’s a rather important thing to remember when your business is making noncollateralized loans.
The bottom line is that after years of pre-approving anyone with a pulse and a P.O. box, the industry has finally sobered up and realized that they have extended billions of dollars in credit to people who haven’t got the means to pay it back. These are loans that should never have been made.
Many of the recipients of these loans, unable to to pay even the accelerating fees and interest — often 20 percent or more, have been filing for bankruptcy protection. The industry’s response is this piece of legislation limiting the availability and extent of that protection.
This desperate response is understandable, but irrelevant. Senate bill 256 does not repeal the Law of Blood and Stones. An act of Congress cannot change the fact that these folks ain’t got the money.