President Obama’s bad idea

After meeting with credit card industry executives yesterday, the president proffered what he thought were some good ideas to protect consumers from complex and often deceptive credit card products.  While most of his ideas were good and predictable, one struck me as a bit odd.  The president stated:

“…we think that one of the things that needs to be explored is the possibility that every credit card issuer has to issue a plain vanilla, easy-to-understand, simplest-terms-possible credit card as a default credit card that the average user can feel comfortable with.”

As many of you know, I am also a business owner.  When I heard his statement, I automatically morphed into my business owner frame of mind, thinking, “Who gave the president that idea?”  Requiring every credit card issuer to offer a Fisher-Price credit card would be like forcing Mercedes-Benz to sell a Honda Civic, or asking Morton’s to serve Big Macs. 

I like the president—he seems like a smart guy—but whoever suggested that idea didn’t have his thinking cap on.  At the very least, he didn’t acknowledge that there are already great options, like credit unions, which offer simple, no-frills credit cards. 

If there is a need for such a basic product, the market will naturally create it—and it has. The government shouldn’t get into the business of dictating companies’ product lines.  We need reasonable product regulation not product dictation.  There is certainly a fine line between the two—and navigating it is difficult—but I think such an idea directly threatens our free enterprise system.

Am I off base here? Have I lost touch with my consumer sensitivity? Do I sound like a seething, free market capitalist?   

Comments

[Timothy Jones]

No, I think Obama is spot-on!

We must insist upon simpler disclosures! Without them, they get foggier and lengthier, simply to discourage people from reading or understanding them. Then when nobody is looking, the companies stick something odious in there, knowing that most people will just skip right over it.

Notice that most of the agreements ALSO make you agree to accept any changes without being notified, and that it is YOUR responsibility to check it periodically. Of course, they never list what the changes are. To be properly vigilant, one would have to compare each line to the previous version!

This has happened to credit card statements, mortgage notes, software licenses, website privacy policies, TOS (Terms of Use) agreements by ISPs, and more.

Simple disclosures are good for ordinary people, and bad for lawyers! If they can't say it simply, there must be something bad to hide!

[Sharon Barlow]

Although I don't live on the edge, I certainly live closer to it than Obama or any other of the powers that be. I don't really think they understand most of what is happening with credit--it just isn't something they have to contend with. I voted for Obama and am still glad I did but I sometimes I wonder who it is that he listens to. Serously, why doesn't he just listen to you?

[Billy Bob]

[I don't think he was saying that the credit card companies can't offer other types of cards. What I think he was referring to was that he wanted them to offer a card that would spell things out in plain and simple language what the terms were, etc. Let's face it, do most people read those terms of agreement that come with credit cards? No. And they are in such language that you'd need a Harvard law degree to figure out what it's saying anyway.]

I undertand that those cardholder agreements are written in language that is obfuscatory, to say the very least. Be that as it may, there is *nothing* to prevent folks from picking up the blower and grilling the card companies over the phone.

Same deal with jumping online and sending a prospective card issuers some emails asking for clarification.

The whole idea of asking card companies to write a "Fisher Price" card agreement is going to do nothing but dumb consumers down even further. If you're applying for a credit, the onus is on the *consumer* to understand just what it is that they are getting into.

That is, if you don't understand something, you probably shouldn't be getting into it. This whole Fisher Price deal doesn't sound much different from those folks claiming that they were "victimized" when they took out huge loans when they never bothered to do the basic math themselves to see if they could reasonably afford the loan they were offered.

[Aaron M.]

I think you're on to something, KJ. Making the companies create a basic product will cost them additional money. Not only will they have to pay for the new regulations required by the Fed, but they will also have to pay for the launch and sustentation of a new product. That seems a bit much. And the new card requirement could eat up earnings because of increased operational expenses and thus make the stock price valuation go down. It sounds like a bad idea to me.

[Carole May]

I don't think he was saying that the credit card companies can't offer other types of cards. What I think he was referring to was that he wanted them to offer a card that would spell things out in plain and simple language what the terms were, etc. Let's face it, do most people read those terms of agreement that come with credit cards? No. And they are in such language that you'd need a Harvard law degree to figure out what it's saying anyway. He wants all of that to put into language that the average person on the street can understand. I have a Master's degree and I've read some of those agreements and don't have a clue as to what they are talking about.

He also said he wanted this nonsense of whatever the card companies want to do, they can do to stop. I got that attitude from Chase when I called about my interest increase. She said "We can do whatever we want, whenever we want". That is what has to stop. We need terms that we can understand, and if they are going to be changed, those changes have to apply ONLY to future purchases, not to purchases made previously.