Usury bill would cap credit card rates at 16% and have additional costs

Representatives John Tierney and Michael Capuano will be introducing a bill which would force credit card companies to cap their rates at 16%. I know a lot of people will think this is a fantastic idea. After all, to these people, banks are evil, and people are blameless for their situations. This bill embodies the bank as aggressor, borrower as victim stereotype, so it should find broad support, which is unfortunate.

If borrowers make intelligent decisions, they can move their business away from high-interest credit cards to low-interest cards. As a result, those banks with excessive rates would suffer financially. Of course, choices would be limited for borrowers with bad credit, but whose fault is that? The borrowers obviously, but I suspect that you won’t see many people on Capitol Hill hold individuals responsible for their decisions. After all, many voters don’t want to hear the truth.

By the way, I find the potential effectiveness of this bill questionable. Since banks want to maximize their profits and those profits will be reduced by having to lower high rates, what will they do to make up for the loss in revenue? My guess is they will raise the interest rates of those who are paying below 16%. These people are also known as borrowers with good credit who actually pay their bills on time. So, if you have poor credit, you’ll pay 16%. If you have good credit, you’ll pay 16%. Responsible borrowers can subsidize the porr decisions of the rest. That’s fair, right?