Barney Frank is no longer a politician. He served as chairman of the House Financial Services Committee during the Great Recession, from 2007 to 2011. However, he suffers from the illusion that he actually oversaw the implementation of legislation that actually did something. The Card Act signed into law by President Obama in March of 2009 (on Mr Franks watch) was probably the most water downed consumer protection plan written in decades.
In an interview this morning on CNBC, he illustrates how far out of touch politicians are with reality. This is really a shame because our elected officials really do have the opportunity to do some good. Here are some quotes and some reality:
"While we have made significant progress in reducing the amount of imprudent household lending in the past 10 years, the financial pressures people face have not abated, and the incentive to borrow more than is manageable remains strong."
Let's see...credit card debt is at record levels. Credit card companies are still lending money to people who can't afford to borrow and doing so at the highest interest rate average in history. The incentive to borrow is there because credit card companies will freely lend it. That doesn't seem like much in the way of progress Mr. Frank.
"But other protective measures work fully only if consumers take advantage of them. This means reading the fine print in every financial agreement you sign and understanding what the contract terms and language really mean."
I agree that you have to read the contract Mr. Frank, but have you read a credit card contract lately? Are you referring to the fine print that they can change for any reason? What good is it to know the fine print when they can change it?
The truth is that Washington failed the consumer with the Card Act. Here are the three things that should have happened:
Caps should have been instituted on credit card interest rates limiting the ability to charge usury rates.
Lending standards should have been increased forgoing the need to charge 25% interest rates.
Stop allowing credit card companies to change the terms and conditions - it is the worst consumer contract known to man
As with any legislation from Washington, the politicians leave a lot of back doors to ease the pain of new rules. After all, you have to take care of your benefactors. Unfortunately, they left the door of abuse still open for credit card companies. Even more unfortunate no one seemed to learn the lessons of the credit crisis in 2008 doomed to repeat it in an environment that has even more debt.
No, Mr. Frank, there wasn't much progress over the last 10 years and banks and credit card companies are making more money than ever at the expense of the consumer.