by Jeff Sovern
This morning, the Pittsburgh Post-Gazette published the following essay I had written:
Private Sector Commentary: New credit card law has teethTuesday, June 30, 2009
The credit card legislation President Obama signed into law represents a sharp break from previous federal credit card statutes.
Ever since the landmark Truth in Lending Act was enacted in 1968, Congress has focused largely on disclosures of credit card terms on the theory that informed consumers would select the best credit terms available to them.
But rather than just mandating improved disclosures, the legislation contains outright prohibitions on certain credit card terms, such as increases in the interest rates charged on existing balances or sending monthly statements to consumers less than three weeks before the payment due date.
Put another way, you will not be able to agree to those terms with your credit card lender even if you wanted to. This shift reflects a better understanding of consumer decision-making. Classical economic theory of the sort in vogue 40 years ago presupposed that rational consumers, if properly informed, would choose wisely.