As if the economic news weren’t bad enough at the moment, with analysis of the near future looking grim and unemployment numbers rising as consumer spending tanks, you’d think a little common sense might kick in somewhere. And maybe we’d get better regulation and enforcement to combat fraud, deceit and outright bilking, wouldn’t you?

You’d be wrong.

Enter new "credit card regulations" issued by the Federal Reserve, Office of Thrift Supervision and National Credit Union Administration. To wit:

Among other things, the new regulations prohibit lenders from raising interest rates on existing balances unless a payment is received late. Credit card issuers will no longer be able to charge a late fee if a statement isn’t sent in a reasonable amount of time to allow a consumer to make that payment. Issuers also would not be allowed to allocate customer payments in a way that repays debts with higher interest rates last.

In an idiotic move on the government’s part, the new regulations don’t become effective until July 1, 2010. The government wanted to give the companies time to change their systems.

Because, as we’ve all seen, allowing the industry to "do the right thing" and "police itself" always works out so fab for the rest of us, doesn’t it?

Pausing here for a moment of primal screaming from the grown-ups in the audience.

CJR recently highlighted a series that the Miami Herald has been doing on fraud and problems in the lending industry that would make your head explode if you hadn’t been paying attention to the level of stupid and shifty that’s already been exposed. From their most recent Borrowers Betrayed article:

Twice, the Florida Office of Financial Regulation — which polices the mortgage industry — failed to act on warnings that Almeida was stealing from clients, allowing his scam to thrive until police threw him into jail.

The Almeida case highlights one in a series of breakdowns in the state’s enforcement system created to protect borrowers. Since 2000, regulators failed to weed out people with criminal histories, monitor scam operations and discipline crooked brokers, a Miami Herald investigation found.

State regulators allowed thousands of ex-convicts to enter a profession that gave them access to the most sensitive and personal financial information: credit cards, bank accounts and Social Security numbers.

Those criminals went on to commit nearly $85 million in mortgage fraud, the newspaper found. They stole their customers’ identities. They stole their money. They even stole their homes.

Holy hell in a handbasket. Beyond trying not to be stupid in the future, could we start by not being criminally negligent with people’s financial data and having regulators actually do their freaking jobs instead of looking the other way?

But what am I saying?!? The market will clearly take care of this in time if we just leave the criminals alone to steal more people’s financial data, won’t it? Just like those nice credit card companies will revise their own internal bilking and pillaging policies all on their lonesome because it’s the right thing to do.

Why yes, I am rather cynical. It comes from knowing that somewhere out there is a regulator who said "well, gee, I’m sorry that guy stole grandma’s house, but what in the hell do they expect me to do about it?"

(YouTube — Beatles "Revolution.")


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  4. Re: Re-Regulation — Got Change?
  5. Tony Coelho Lobbies for Drug Industry Self Regulation