Creditor Retaliation

Probably not the most festive of blog subjects for this holiday season, but in reading many articles, blogs and comments there is a great buzz brewing over creditors and the most recent legislation. For a couple months now I have seen a rift brewing between those advocating using cash and debt cards and those promoting credit cards. I realize that many people may find this trivial, but it is very significant to our nation’s economy, since our entire national economy is built on credit.

Last week, as many are aware legislation was passed to restrict some abusive practices of creditors. It is a law greatly overdue, yet at the same time we will not see its effect until July 2010. Last night I read an article stating this legislation will be bad for our economy and bad for America. Let me preface before going into the reasoning. This article was written by a reporter in Bangalore, India-a place where most credit corporations outsources customer service agents. When you have a question or want to challenge your bill, you must talk to someone who’s second language is English. I’m not even going to address the fact of taking jobs away from Americans.

The article expressed the subject much more eloquently, but I’ll describe it as creditor retaliation. Since creditors will no longer be able to hike interest rates, deploy double billing cycles and more, they will stop issuing credit, or at least be more selective. Others like Capital One and Discover will close accounts and American Express will deny consumer charges. The Bangalore article stated that without the ability to raise interest rates, creditors would lose “flexibility”.

As a woman, I have excelled in the art of reading between the lines. Here is what creditors are saying, “If you don’t play by our rules, you cannot play at all. You either accept the rules per our discretion, or no more credit.” Ooh, I’m shaking in my shoes. No more debt, how could you? This to me goes back to elementary school. You report on a bully to the teacher, the teacher reprimands the bully and the bully retaliates by beating you up after school. It really isn’t much different.

Here is the greater problem. Our economy is built on consumer spending and spending on credit cards, and many creditors have fixed it so we pay a hefty price for spending on credit cards. Now that the bottom has fallen out, consumers are spending wiser and with cash/debit cards, but where does that leave our economy? The free market spending machines comes to a dramatic halt when consumers stop shopping. For the best post of the day, Huffington post on Laissez Faire Capitalism.