100 Economics Question of the Day: An Intermittent Blog: Menendez proposes a credit "bill of rights"

Tuesday, April 25, 2006

Menendez proposes a credit "bill of rights"

I'm not certain a pulse is required

Declaring that anyone with a pulse and a Social Security number can get a credit card, Sen. Robert Menendez, D-Hoboken, unveiled legislation Monday that would strengthen consumer protections against zealous marketing practices and abuses by credit card companies.

How zealous?
Menendez, a member of the Senate Banking Committee, said credit card companies have increased their solicitations to consumers 500 percent since 1990, to more than 5 billion in 2004. A member of Menendez's own staff got a solicitation for his 2-year-old child last year, the senator said.

Only one? I've gotten four or five for Valerie so far this year.

The issue:
"More and more Americans are using credit card debt to manage daily living expenses such as basic living costs, medical bills and house or automotive repairs," Menendez said in prepared remarks released by his Senate office.

And the opposition:
Feddis said banks are already required under federal law to assess credit risks before issuing borrowing limits.

But if they were doing so, would they have needed last year's bankruptcy bill?
Menendez's proposal would keep credit cards from some borrowers who would use credit only in emergency situations or to build their credit history, she said.

How would this be so? In the former case, the person is clearly credit-worthy, and in the latter (where, presumably, one pays off the balance on time each month), the same would be true.

The question one has to ask is whether the business model for credit card issuers conforms to that of the "required...assess[ment of] credit risks." No reasonable analysis of Feddis's statements would lead one to believe it does.

(links and updates to follow)


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