Tuesday, November 11, 2008

Leave the credit card companies alone.

"I think we have got to bring the credit card industry in to talk to them to join with us in establishing clear principles to apply to the costs people face on their existing debts."

Gordon Brown, November 11 2008

Pity the poor credit card companies. Brown wants a little chat about their interest rates. He thinks they are charging too much.

Lets set down some basic principles here. First, no one forces anyone to take out a credit card. So long as the credit card company tells their customers up front their interest rates, then it is no concern of the government. If people want to pay 20 percent extra on that flat top TV because they "need it now", then go ahead. However, they must live with the consequences. We are dealing with consenting adults here.

Second, credit card companies have a serious problem with defaulting customers. When one borrower stops paying, then every other borrower needs to cough up the loss. That is how banking works. If you don't like it; don't borrow. Personally, I don't much care for paying for other people's defaulted loans. Therefore I don't run up a credit card balance.

Third, the larger the number of defaulting borrowers, the higher the interest rate for other credit card debtors. Credit card companies are there to make a profit. Again, if you don't like it, don't run up debts on a credit card. Again, I don't like it, and I don't have any credit card debt.

Brown's comments today are really quite sinister. Suddenly, state intervention into the economy is back in fashion. The government has no business determining credit card borrowing rates. It is yet another creepy step towards state control.

Obviously, credit card companies are deeply unpopular, and bashing them is a cheap route to popularity. Who is going to stand up and defend money grubbing credit card companies? In the absence of any other volunteers, I will do it. Leave the credit card companies alone, Brown.


  1. My company has just dropped me a line to say that anything I spend in the next two months can sit interest-free till May. Nice, eh?

  2. Aside from the terrible economic news, I think that we are moving towards fascism. Before you laugh, I mean that as the word originally meant, that the state takes precedence over the individual.
    We all sit at home and read these blogs, I am very grateful Alice, but I think, apart from an economic collapse, that this country will be very different from the country that Labour was voted in, back in 1997.
    We are going to have to suffer the consequences of a decade of a New Labour government.
    Or to put it more precisely, you are, because I will leave the UK for the same reasons that so many have in the past. Brighter days elsewhere !

  3. lucky you dearieme. Perhaps, Brown should take into consideration their generousity before laying into the credit card industry.

  4. What we should remember is that Brown is a desperate man - like a prisoner that has just escaped from death row, he has nothing to lose.
    Unless he kick starts the housing bubble, his miracle economy is finished and he will go down in history as an economic baffoon - a bit like Frank Spencer is to the world of DIY !
    And a reply to anonymous - I am also considering a move abroad as I believe the UK is finished - the depths of debt, state meddling and lawlessnes will only get worse - enough is enough I think... and I will be taking all my money with me... Gordon !

  5. "Buyer beware", unless you've been reckless. Then it's buyer-bail-out-bonanza time. Let's get the economy going tomorrow at the same impossibly ludicrous level induced by the easy debt of yesterday, no matter what the cost.

    Pay down debt? Increase savings even? Perish the thought! Savers? Who need 'em? Debt got us into this mess, but by god, gordie-the-great-sage-of-world-economic-redemption knows that more of it is the solution that is somehow going to get us out into the sunshine. Just cut rates to get those consumers spending more of what they haven't got - unless it's more debt via credit card spending of course..

  6. All of the post-war industrial recoveries were enabled by high regular savings being ploughed into commercial investments such as car plants, fabrication plants and such like.
    We are going to be the only country in the world attempting to kick start structural changes to the UK by extending a borrowing binge on imports !
    We are stuffed. Next stage people getting pulled out of houses to make room for more needy refugees.

  7. Gordon has long since moved from redistributing wealth he's stolen from producers to attempting to redistribute wealth that doesn't even exist.

    At some point King Canute is going to realise you can't order the waves to part. There are limits to what can be done even at the point of a gun.

  8. Where to go? How's NZ looking?

  9. I think that there should be intervention - though probably not what Brown is doing.

    I take issue with the way in which credit cards are marketed - which I think is deceptive and should be tackled by trading standards. I think that interest rates should be required to be stated clearly... I don't find it acceptable that cards can be marketed as 0% - as, clearly, to any thinking individual, there's going to be a catch. We don't obviously misleading advertisement with cars or food or consumer electronics - so why should we accept it with credit... where the customer is, typically, in a more vulnerable position?

    No, I don't think that people should be 'saved' from their reckless spending. I do think that it should be possible to quickly and easily understand the terms (including long term implications) of any credit product. I don't think this is the case at present.

  10. maybe it is time for decent and sentient people to go into politics... there may be a chance to break the incestuous relationship of governments and corporations, get some plutocrats to part with their ill-gained money, and have governments to do something for a public good, for a change. How about quitting wars (on drugs, on terror, on oil) and attending to urgent matters at home? Governments may become more responsive in coming years.

  11. asteve - I agree that the credit card companies market their products in such a way as to sucker people in, but anyone with a brain (that's less than half of the population in 2008 UK !) would see that 0% credit just is too good to be true.
    But people WANT to believe that they can have it all, just like "Posh & Becks", without actually doing anything to earn it.
    No sympathy with these people... bring on the repo men !