One year after filing for bankruptcy consumers receive an average of 14 credit card offers every month. The average American family only receives 6 offers each month.  More credit card companies are marketing specifically to low income consumers, consumers with poor credit and people freshly out of bankruptcy, which the National Financial Awareness Network claims is irresponsible lending.  It seems that credit card companies are targeting subprime consumers and bankruptcy filers to get them back in the cycle of debt.  Why?

President Barack Obama recently signed into law a credit-card consumers’ “Bill of Rights” that limits fees and curbs contract changes, saying it will give Americans “the strong and reliable protections they deserve.”

The American Bankers Association, representing companies such as Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc., opposed the bill, saying banks will be prevented from pricing for risk and credit may become less available.  The new law may prompt banks to slash available credit by as much as $90 billion to avoid risk, said Robert Hammer, chief executive officer of R.K. Hammer Investment Bankers, an adviser to card companies.  

‘Undiscussed Consequence’

The interest will be too high for some -- and in other cases, banks simply won’t issue cards, said Hammer. He estimated that as much as 10 percent of the $934 billion in U.S. card loans would disappear.  “The unintended, unpleasant, undiscussed consequence of this legislation is that banks will cut credit to reduce exposure to future loan losses,” Hammer said.

That reduction could choke off a consumer-led recovery and hurt retailers struggling amid the longest recession since the 1930s, said Andrew Caplin, an economics professor at New York University. Consumer spending accounts for 70 percent of the U.S. economy.  “The bill may stop various forms of abuse, but it will also stop some various forms of credit,” Caplin said. “If the economic recovery is going to rely on consumer spending, it will be a long wait.”

Reduce exposure to future loan losses?

The problem with this kind of thinking is that credit card issuers have been aggressively marketing to people with a history of not being able to pay back their credit card debt.  Watch this astounding video:

About The Author:

This article was written by J. Mark Soveign who writes for Wertheim Communications LLC as well as Mooker.Com

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