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Cheers - AE

Thursday, 2 July 2009

More government interference in your life.

If you're running a credit card company you can stop fooling yourself - the government are going to tell you how to run it now.
Credit card firms will be told today to stop luring customers into higher borrowing as part of an overhaul of consumer rights. Lenders will be banned from raising credit limits without asking the customer first and ordered to stop sending unsolicited credit card cheques through the post.

They will also be banned from raising interest rates on existing debts and have to put repayments towards paying off the most expensive debt — rather than the cheapest as most now do. Minimum monthly payments will have to rise.
Oh, do fuck off. Look, when a credit card company raises someone's limit there's nothing stopping them from ringing the card company and telling them to fucking put it back or they'll pay the card off. There's nothing stopping them from ripping up unsolicited blank cheques either. Being unable to raise interest rates creates a bit more stability for the borrowers but is grossly unfair on the lender when the base rates are still liable to changes. The rest is simply interfering with how they choose to run their business, and again people can always go to the competition if they don't like it.

No doubt the feeling is that there are a lot of people with debts that are becoming unmanageable.
No, not them. Well, not just them anyway. There are a large number of people to whom banks, credit card companies and other lenders have loaned money in a very cavalier way, and because some of these people were either unlucky or had the self control of a four year old alone in a sweet shop many now owe significantly more than they can afford to pay back. This is certainly a problem, but it's a problem that came about because of the boom in easy credit created by the Sub-Prime Mentalist himself when he was Chancellor. He had no complaints about the debt people were running up while easy credit was helping to fund his lavish public spending, but now we're back to recession and the fear of repossessions, busy bailiffs and personal bankruptcies suddenly "something must be done".

Well I have an idea what could be done: nothing. Let the credit card companies and their customers sort it out themselves. Those who are struggling can come to repayment arrangements with most lenders and since a bankruptcy will often mean that not all the debt will be recovered there can be as much incentive for the lenders to try to avoid that as the borrowers. What that should mean is that only the very deepest in debt, which will usually (not always, I admit) be the most irresponsible borrowers, will become bankrupt, and both borrowers and lenders will take more care in the future. This is less likely to happen if the government interfere with artificial protection for borrowers because the risk vs reward balance is unnaturally tilted away from the risk side. The disincentive to get a credit card and spend like crazy is reduced when people think life in debt is easy than it really is. But perhaps that's what we should expect from governments when their own debt problems are solved by printing money now and fucking the taxpayer for it later.

Incidentally, The Times also had a link to a finance article listing Gordon Clown's ten biggest financial fuck ups, where they note that
Even after he leaves office in 2010, as is almost certain, it seems that we will all be paying for Gordon's gaffes for many years to come.
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