Tuesday, January 4, 2011

Dodd-Frank Is Raising Credit Costs For Low Income Consumers

From The Wall Street Journal article, "Dodd-Frank and the Return of the Loan Shark: In the name of consumer protection, Congress has pushed more Americans outside the traditional banking system" by Todd Zywicki:
The least surprising event of 2010 was that, in the wake of new federal limits on how credit-card issuers can price risk and adjust interest rates, more Americans had to go to payday lenders, pawn shops and local loan sharks in order to get credit.
Proponents of the 2009 Credit CARD (Card Accountability Responsibility and Disclosure) Act argued that it would protect Americans from exploitative credit-card companies by limiting penalty fees and interest-rate adjustments. For many Americans, though, the law meant higher interest rates, an increase in other fees, and reduced credit limits.

The impact was even worse for lower-income Americans, who have lost access to credit cards and were dumped in the laps of payday lenders that charge interest rates 10 times higher than credit-card companies.
Read the complete Wall St. Journal article here.

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