It’s not entirely analogous, but I’ve heard similar arguments from rogue debt collectors and telemarketers (particularly right before Congress passed the Do Not Call legislation)–essentially, that regulations on what they do would cost them money or even their livelihoods and for that reason shouldn’t be enacted. While I agree we shouldn’t strangle business with unnecessary regulation, I don’t think Congress has any obligation to ensure or preserve the profit margins of the past.

My answer: if I had earned that extra money from deceptive, unethical and borderline fraudulent business activities, I’d probably shrug my shoulders and take my medicine.

Bill seems to have a skewed idea about what the CARD Act actually does. It places no limits on the interest rates that banks can charge, nor does it force them to keep on customers they don’t want, and thus his claim about banks being “stuck” with unprofitable higher risk customers doesn’t hold water. The CARD Act merely ends a number of egregious and sleazy business practices, and forces issuers to actually abide by the terms they offer to their customers.

Among the practices ended by the act are arbitrary interest rate increases on existing balances, universal default, no-notice rate increases, double-cycle billing, due date gimmicks, use of misleading terms in a contract, abuse of over-the-limit fees, unfair allocation of payments (i.e., allocating a payment to the lowest-rate debt first), and predatory practices with respect to fees on subprime cards.

Again, it does not cap interest rates and it does not limit when rates can be increased on future balances. So you’ll forgive me if I don’t shed any tears for these poor beleaguered banks who are only trying to make an “honest dollar”.

As a result of the CARD Act, banks are now “stuck” with segments of higher risk customers that will not be profitable. The mass of better risk customers will have to subsidize their cost to allow the bank to make a profit in this business.

Until the higher risk population can be reduced as a proportion of the bank’s overall credit business, everyone’s prices for credit will go up.

And customers that used to be able to get credit from banks, will no longer have this option. While they might be “less savvy” they are still adults with a right to their own decisions – And they will find other less regulated sources of credit.

The result of the CARD Act is that fewer people will have access to regulated credit sources. Not that customers will have better prices.

Our legislators have arbitrarily determined that the previous set of rules were insufficient to protect consumers from being charged too much interest (insert annual fees, ODP charges, or any other revenue equivalent item). They have altered the bank’s ability to make a profit, a shareholder’s ability to earn a return, and even the customer’s ability to get a credit card.

Why are we surprised that banks will use this time to identify and implement ways to allow them to still make a profit? Or that shareholders of the bank still expect a return based on revenue and profit growth? Or that displaced customers seeking credit will find other lending alternatives that charge every bit as much as the bank (or more.)

If the government decided that your income was no longer earned fairly, and that effective some months from now you could no longer collect the same level of pay for what you did, how would you react?

Wouldn’t you be as energetic as possible, seek every immediate way to maximize your earning potential until that day — and then try to convince your spouse that making less was really OK? I suspect that you’d do some foolish things like the banks have, and in the end, learn to adjust.

Why is anyone surprised, or angry, that when the legislature takes away your ability to earn a profit, organizations seek alternatives that may test the new boundaries of legality or common sense?