Should the Government Regulate the Credit Card Industry?
Previously published on May 9, 2010
Credit cards can be very useful tools as they provide instant lines of credit for a user while they offer greater security than cash and debt cards. The cost of this conveyance is an extraordinarily high interest that can hit someone, who keeps a balance on their card, hard. Today, a good majority of creditors offer no fee cards and almost anyone with an income can obtain one; however, creditors do not offer their customers these services to be kind. They are in the credit card business because they feel they can make a profit. Although credit card companies do not offer their customers the best terms of agreement, it is a perfectly legitimate business and government has no need to intervene as long as the customers are given a clear choice in accepting the use of the card and the terms are not designed to hurt customers.
Government needs to place regulations on companies when an industry's practices harm the Nation economically or otherwise while it also has a legitimate right and duty to protect its citizens from unethical and predatory business practices. Credit card companies offer Americans the option to elect to make a minimum payment; however, this payment fails to pay down the principle of the loan leaving a perpetual debt. As there is a lack of transparency and the user agreement is designed to disenfranchise the credit card holder by allowing the creditor to modify the loan agreement, whether there is a balance or not, at will, these type of lending practices are, at the very least, unethical while it has indebted a huge portion of Americans. Furthermore, creditors offer credit cards to those who have too of low incomes to afford the credit limit with its high rate, are unable to pay off the debt they are expected to acquire, and would not normally be eligible for other loan products that would not trap them into a debt cycle, thus, credit card companies intentionally draw individuals into financial traps.
The lending practices of creditors that offer credit cards are damaging to the individual, the economy, and the creditors themselves. Trapping customers in a debt cycle that they cannot free themselves from, ruins their credit history, consumes their finances, leaves them unable to take on healthy debt to improve lifestyle, and leaves them unable to support the economy through continued spending. Without healthy consumer spending and individual investment, the economy is destined to fail. Furthermore, companies may enjoy the profit from the perpetual debt, but high risk comes from customers who eventually cannot make payments or are tired of perpetual debt. Credit card companies and other lenders need to engage in proper lending practices that look at the larger effects of lending practices versus the possibly high profits of bad business.
Government clearly has an interest in regulating credit card companies and need to do so for the sack of the American citizens, the American economy, and those creditors. Moreover, People should be responsible for their financial decisions and the debt they take on, but when companies place them in a situation where they are collecting several times the debt amount, they are disenfranchising their customers who are citizens of American and need their government's help. It is when companies take advantage of customers and bad economic situations that they invite government intervention.