"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.