The Alexander City Outlook

Law forces more responsibility

Sometimes unintended consequences are the best thing that can happen to a person.

Take for example a recent federal credit card law that went into effect last week. Most pundits have hailed this act as the most sweeping piece of consumer protection legislation passed by congress in years. In fact, many commentators believe that Americans’ access to credit, as well as their relationship with credit card companies, has changed for the better because of this new law.

For the most part I believe these pundits are right, but not in the way you might think. It’s true the law will shield users from long standing practices like sudden interest rate hikes, excessive fees and other gimmicks used by credit card companies to squeeze money out of their customers in order to ensure hefty profits.

As an example, a report issued by the Pew Charitable Trust, an organization that tracks the credit card industry, states over 10 billion will be saved on interest rate curbs alone. So, there really is no doubt this law will help protect consumers from credit card company excesses.

Unfortunately, there is a problem with this rosy scenario. Because congress passed this law in 2009, companies have had over nine months to prepare for the change. Taking advantage of the time, most have increased interest rates, created new fees and cut millions of credit lines with wild abandon before the law went into effect.

Many analysts have lamented this fact. The law, designed to protect consumers, has had the unintended effect of making it more difficult for Americans to gain access to credit. Plus, those who can get credit are going to have to pay higher interest rates. As a result, something that was supposed to help ease the pain of a tough economy might have the opposite effect.

All of this sounds like very bad news. However, I believe this unintended consequence is really the law’s greatest asset.

Let me explain.

A big reason why our country is facing the worst recession since the Great Depression is the fact we have gorged ourselves on credit for the past 20 years. Without a doubt, Americans have piled up a huge credit card debt buying everything in sight. Our consumption driven society has glorified the acquisition of stuff for decades and we are now paying a steep price for our past fiscal sins.

In many ways our economic problems are not complicated, but rather straightforward. We’ve simply bought more than we can afford.

The greatest benefit of this new law addresses this predicament by forcing Americans to live within their means. In an economy plagued by consumer debt, congress has unintentionally forced Americans to be more fiscally responsible. Limiting credit, making it more expensive and difficult to obtain, is exactly the medicine we need.

I’m not saying that credit is bad. Businesses and individuals alike need access to loans in order to succeed in today’s market. Still, we need to make smart decisions on our purchases and investments, rather than buying anything and everything we desire on a moments notice.

Now, if we could get congress to pass a similar law to force fiscal responsibility on our government, maybe America would have a chance to remain the greatest county on earth.

I don’t know about you, but I’m not holding my breath waiting for this to happen.