H.R. 5244 is wrong way to regulate credit card industry

Most Americans might agree that credit cards are like many things in life — not perfect, but working pretty well.

The proof of how well credit cards work is clear: Seventy-five percent of American families have at least one card and less than half carry a balance. These factors help generate more than 25 billion card transactions every year.

But how many Americans fully understand the disclosures that accompany their credit cards, which include terms like “two-cycle billing” and “payment allocation structure”?

Clearly, improving disclosures would empower consumers to make more informed credit decisions.

To its credit, the Federal Reserve is using its authority under the Truth in Lending Act to address disclosures, launching a major effort to examine existing requirements and how more effective notices and improved transparency can reduce confusion for consumers.

To draft its guidelines for improved disclosures, the Fed invested in a lengthy process of consumer testing for different wording and layouts and solicited public comments from consumer groups and credit card companies.  

The Fed has also begun a review of the Unfair or Deceptive Acts or Practices (UDAP) statute, seeking to further protect and empower consumers.

Yet in the rush to legislate on regulatory shortcomings that contributed to the recent economic downturn, newly introduced legislation, including H.R. 5244, hopes to dictate credit card terms and practices that would launch a host of unintended consequences for consumers.

This legislation would limit card issuers’ use of risk-based pricing, an essential tool that allows issuers to set interest rates based on risk, similar to auto insurance rates that are based on driving records. Eliminating it would force card issuers to spread risk among all users, raising the cost of credit cards for virtually all consumers.

Economist Jonathan Orszag, former assistant to the secretary of commerce, director of the Office of Policy and Strategic Planning, and member of President Clinton’s National Economic Council, found that price controls similar to those in H.R. 5244 would aid only a slim minority of borrowers.

Orszag reported that the Fed’s revision of disclosures, as well as other alternatives to legislation, can more effectively protect consumers without raising the cost of credit.

Put into clear and concise terms: Instead of drastic action that could backfire and make credit more expensive, Congress should encourage the Fed to complete its process as soon as possible.

Washington

Race is definitely factor in election

From Dave Livingston

Byron York is charmingly innocent in his column “Obama and the race factor” (April 10).

How anyone alive and awake in America, given the antics of Jeremiah Wright and his relationship to Obama, could suppose that race wouldn’t be a factor in this election is baffling. Granted, class is a factor also.

On the other hand, the apparent vast majority (70 or so) of my fellow former Peace Corps volunteers from Group Liberia One, 1962-’64, a group 95 percent middle-class white with whom I’m in contact today, are staunch, nearly rabid, Obama fans.

As did approximately a dozen of us, subsequent to my Peace Corps service I fought in Vietnam during Mr. Johnson’s War. I’m in contact with several fellow Vietnam War veterans, at least some of whom consider Obama a racist and say they’d be unlikely to vote for him for that reason alone even if they, most of them, didn’t intensely dislike Obama’s left radicalism.

Somewhat similarly, my former commanding officer in my second tour in Vietnam remains incensed with Michelle Obama’s “For the first time in my adult life … “ comment.

Colorado Springs, Colo.