The New York Times reports that the gun lobby has persuaded Senators to attach an amendment to the credit card reform legislation permitting carrying of firearms in national parks.  Perhaps bankers opposing the credit card legislation should adapt the old NRA marching cry: "credit cards don't kill people, people do."  Well, probably not, but the point should be a part of the debate over credit cards.

Popeye cartoons feature a character named Wimpy who is always proposing that he would gladly pay Popeye Tuesday for a hamburger today, and a whole industry has been built on that impulse.  Barbara Kiviat writes in Time Magazine about findings from studies of credit card behavior. "They [show] a systematic psychological breakdown — as a species we're just really bad at understanding costs that come later on."  She describes proposals that would make future costs more salient to consumers, essentially better disclosure methods.  Whether better disclosure will thwart the human impulse towards immediate gratification is not clear.

Another amendment that Senator Durbin would like to attach to the credit card legislation would create a Financial Products Safety Commission.  A separate bill already in the hopper that would do so is alive and attracting interest in the Senate (S. 566).

The proposed Financial Products Safety Commission would have the authority to prohibit certain credit card practices that cause financial difficulty for consumers.  Professor Elizabeth Warren, who originally proposed the idea, has stated with respect to the purview of the Commission "[i]t’s not the role of government to say someone can’t go to the mall and charge too much or that a credit card company can’t ding them for being late on payments. The point is focused on the tricks and traps and that this should not be about hiding things."

This sounds good, I guess, but let's try to apply the distinction between hidden tricks and traps on the one hand and on the other hand areas the government should not be concerned with. Some common characteristics of credit card products that bankruptcy theorists believe increase the risk of consumer financial distress and bankruptcy include teaser introductory rates, no annual fees or introductory waiver of these fees, low monthly minimum payment requirements, and rewards for use of the credit card, and once the cardholder is carrying a balance, penalty fees and interest rate increases for late payments and overlimit charges.  To these I would add widespread availability of credit cards to most economic levels of society, high credit limits, and transfer of the transactional costs of credit cards to merchants.

Some of these practices are already the subject of credit card regulatory changes and the reform legislation in Congress requiring more transparency and restricting unilateral changes to credit card terms. What additional tricks and traps lie in credit cards that the proposed Financial Products Safety Commission would concern itself with?  Credit cards can be risky in the wrong hands, and to the extent that the features of credit cards encourage usage and accumulation of debt, it becomes difficult to separate tricks and traps from personal responsibility.

I believe that a Financial Products Safety Commission would quickly find itself wrestling with issues of public policy that are beyond the competence of government bureaucracy and that, in my opinion, should be left to the legislative process.