Monday, March 07, 2005

Bankruptcy Bill

This is a disaster for everyone but the credit card industry.

Here's a wealth of info: Talking Points Memo Special Bankruptcy Edition

Read this and ponder how credit card companies really make money.

Bottom line: credit card companies now make half their profits from penalties and late fees. They actively seek out customers who are likely to miss payments and end up in a penalty fee spiral, and they make a fortune from them. In a normally functioning market there's at least a small incentive to limit loans to these high-risk customers, namely the possibility that they might go bankrupt, and the bankruptcy bill before Congress is a brazen attempt to remove even that small but annoying incentive to act responsibly.


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