Deregulation And The Credit Card Industry: Elizabeth Warren


what happened is in the early nineteen eighties on we had at this almost at the same time within months
of each other the credit card industry was effectively de regulated by the supreme court and the home mortgage industry was deregulated by congress now what’s interesting about this is the usery caps effectively were erased no public policy debates the discussion about
what the real implications with the and the opportunity and fairness that directly
relevant but it’s interesting wasn’t that the case that was argued about
or in favor of a credit card and said the credit card industry after he was with him now I don’t know when this that Mark is the decision in the united states supreme
court did effectively that regulates not enough pork
was involved in it or not the on a particular of that sort he shouldn’t have been because it should have
been before for was solicitor general that and what what happens is they deregulated said that credit card companies mortgage lenders could
charge whatever they want few years go by the kitchen I remember in
the early nineteen eighties we have very high inflation rates we’re just beginning to deregulate the person
from that’s right beginning to deregulate the yeah %uh savings and loans that banks are becoming
now a little more competitive and and starting any early nineties the new industry is war very quietly says some problems and that’s the part of the lending industry that doesn’t do the old-fashioned kind of
when that is they look at someone like elizabeth warren and ending say we think she’ll be able to pay back without
any difficulty and therefore will wind her it whatever’s the interest rate that they think
reflects risk and the possibility of inflation instead of what happened is they said from home we could make really good money he’s not someone that was one she pays back
on time and in all it’s to lend to her nephew who doesn’t have an income yet is a college
student who sporadically employed what wendy here on and count on the fact they still make minimum monthly payments he vacationed weeks get the payment at the start of talks in that by the time
he skipped payment we can check out the interest rate on that and may improve our overall monitored a higher
interest rate but detective interest and interest that that’s
a right that the principal well and a higher interest rate even going to borrow the money eight point nine nine percent it turns out that most contracts are
written today so that the credit card company hasn’t unfettered ability to change the interest
rate so the interest rate may be changed because
interest rates change generally in the country but it may also be changed because you missed
a payment because you went over because you missed a payment on another bill and that changes your credit report and so they changed the interest rate or because
you apply for credit cards somewhere else and the current company found out that you
apply for another credit card and that changes your credit score and so they up you’re interest rates what the credit card companies discovered it’s profits to be made from lending to people who make minimum monthly payments who pay pay pay for a while and miss a payment
miss a payment and fall behind that’s where the real profits for the industry are to be
made I’m not a very profitable customer because they do and for a long time eighty five percent of revenues from credit
card companies from interest payments for people making those
low minimum monthly payments and from fees fees are everything from her annual fee which
has actually been going down because people like me don’t want to pay it to the the fee if you’re check doesn’t clear to
the fee if you’re bill arrives one day late if your payment
arrives one day late if your if you go over the credit limit on your card fees were about one point seven billion dollars in nineteen ninety eight that’s what credit
card companies collected last year they collected more than ten billion dollars

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