You are hereNew Pew "Safe Credit Card Standards" Report Argues for New Regulations
New Pew "Safe Credit Card Standards" Report Argues for New Regulations
Today the Pew charitable trusts released a short report entitled "Safe Credit Card Standards". Pew surveyed credit card offerings from all of the largest issuers, then consulted with various stakeholders--including representatives from credit card issuers. It's a solid effort. Well worth a 5-10 minute read by anyone interested in the topic.
The report rightly presses the case for simplicity and transparancy in product terms and pricing. Always good principles when deadling with personal finance products, the case for them in the credit card arena is especially strong.
One crucial finding in the report is worth citing. From page 5 (emphasis added):
"In the course of these discussions we explored creating a program to certify credit cards which meet the Safe Credit Card Standards. Most issuers stated that it would be difficult to commit to the proposed reforms, however, citing a variety of economic or competitive pressures. Project staff found that a key obstacle to voluntary credit card reform is that it would require a market player to take the risk of sacrificing revenue-generating practices while their competitors did not. Almost all of the issuers contacted mentioned this challenge, with the added threat of being undercut by less scrupulous competitors advertising low up-front rates. More than one credit card executive concluded that their company would not significantly change their practices unless government policies made all competitors subject to the same rules."
These industry reps are recognizing that their firms face a "market failure" problem. Simply put, complying with these standards will put card issuers at a significant competitive disadvantage unless their competitors comply as well. More colorfully, voluntary compliers would be made suckers by non-compliers. Among the various reasons offered to justify regulation, this is surely among the strongest.
This report is well done. As Congress mulls new regulation in this area, it would be well advised to study the report carefully.