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Carrie Conko
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Mercatus Center at George Mason University
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Email: cconko@gmu.edu
Written Testimony on Credit Card Practices - Current Consumer and Regulatory Issues Submitted to the Financial Services Committee Subcommittee on Financial Institutions and Consumer Credit
April 26, 2007
The Issue
- Current consumer and regulatory issues regarding credit card practices.
Our Findings
- Available evidence indicates that the credit card market is competitive and responsive to consumer choice. Understanding the economics of the credit card market therefore raises serious challenges for any proposals to heighten regulation of the credit card market.
- Misguided regulation can have serious unintended consequences that will end up reducing consumer welfare; thus, any proposal for additional regulation should be studied carefully to ensure that the benefits of any such regulation exceed the costs, including any unintended consequences that such regulation is likely to spawn.
- It would be wise to examine the continuing relevance and utility of existing regulations before proposing new regulations. There are three basic manners in which credit can be regulated: substantive regulation, disclosure regulation, or market and common law regulation. Each has costs and benefits.
Recommendations
- The relevant issue for regulation should be to determine whether the resulting complexity in credit card terms was warranted in light of the regulatory action's actual benefit to the consumer.
