Addressing The Weaknesses of CARD
The implementation of the CARD act is not yet eight months old, and people are starting to realize it’s weakness. Simply put, the CARD Act is a static set of regulations on the credit card industry, which is anything but static. It has always been known that these common sense regulations would be under attack by an industry desperate to circumvent them.
The Best And The Brightest
Donna Flagg offers her perspective on how the credit card industry is working to evade the letter of the CARD Act. In her article at the Huffington Post, she recalls how she once conducted a team building exercise with some new hires for a financial company. No matter what the rules, these eager and bright future executives would quickly circumvent them. When called out, they would merely point out that they were not specifically forbidden them from breaking the rules in that particular way.
Ingenuity and creativity are some of the most remarkable human characteristics. When these traits are harnessed by business and channeled towards meeting the needs of consumers, companies can do great things. From personal computers to mountain bikes, we all enjoy products and services created for our benefit and enjoyment. When high achieving individuals are tasked with evading the spirit of regulations in order to maximize profit, you get innovations like payments due on holidays and double cycle billing. In the post CARD world, we are now seeing “professional” cards marketed towards individuals and “rebate” cards that use linguistic games to evade the law. None of this is surprising, and in the context of Flagg’s observations, it should have been expected. In fact, it was.
Enter The Consumer Financial Protection Bureau
The CFPB is a recently created agency that brings all of the regulators of consumer financial products under one roof. The clear analogy is the Consumer Products Safety Commission, that is widely known for it’s recalls of dangerous tangible goods. In the past, regulation of credit cards was handled, or mishandled by a patchwork of government entities, none of which with the clear mandate for protecting cardholders. The idea is that credit card regulation will now be able to occur without an act of Congress. If this new agency fulfills it’s promise, an equilibrium will be reached between the banks who are trying to circumvent the law, and the regulators who are tasked with protecting consumers. Given the huge success of the CARD Act, I am willing to wait and see how the CFPB shakes out before making any judgements.
