Economics, Financial Services

The Unintended Consequences of ‘Consumer Protection’

For critics of the American economy, high-interest consumer credit cards are easy targets. They are near-universal whipping boys for the religious Left, who tend to assume that these credit cards are unjust. Poor people paying 20 percent interest on credit-card debt? That looks like usury.

Combine that assessment with frustrating experiences with credit card companies that we’ve all experienced, and you see why the “2009 Credit CARD (Card Accountability Responsibility and Disclosure) Act” passed without a lot of fanfare.

But of course, such moral assessments often rely on untutored moral intuition uninformed by economic analysis. Todd Zywicki of George Mason University has actually gone to the trouble of studying the disreputable forms of finance available to low income Americans and has discovered—surprise, surprise—that the Credit CARD Act has perverse unintended effects on many poor Americans.

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