Unintended Consequences-Credit Card Regulations

This is from a Coordination Problem post called "Unintended Consequences of the New Credit Card Regulations." Here it is:

"This CNN Money (Watch out for new credit card traps) piece does a nice job in laying out all of the negative unintended consequences of the new credit card regulations, including:

1. New kinds of fees and higher annual fees.

2. Higher interest rates.

3. Less credit being offered.

4. More stringent and costly financial requirements of borrowers.

5. Fewer associated benefits, such as airline miles.

Most of these will disproportionately affect the poor and the young who need the unsecured, if high rate, credit that credit cards offer. It will also hurt those who have had a more spotty credit history, but who could still get cards under the prior regulatory regime. Once again the intent of regulation is far different from its actual consequences.

To re-ask the question Tom Palmer recently asked in a different context: “Does loudly professing concern for the poor translate into actually benefiting them?”

And here's my follow-up: Why is it that the same people who think government is captured by the rich and powerful also believe that government intervention into the market is the best way to help the poor?

Posted by Steve Horwitz on February 20, 2010 at 10:15 PM"

I also wonder that people might turn to criminals to get loans if they have harder time getting credit.