Last week the US Congress passed and President Obama signed into law the so-called Credit Card Holders’ Bill of Rights, legislation that has been touted... as a major reform of unfair practices by credit card issuers. ...pushed through Congress amid growing outrage... over the increasingly arbitrary and usurious methods being used by credit card issuers to extract ever more money from a shrinking pool of card holders...
Over the past decades, credit card defaults have paralleled the unemployment rate fairly closely. This tends to undercut the myth propagated by the media that many people (read: the working class) “irresponsibly” overspend through the use of credit cards getting themselves into unmanageable levels of debt. In fact, it appears that difficulties arise primarily when people lose their jobs....
Credit card companies are behaving in accordance with patterns established in recessions of the past. The companies squeeze cardholders in order to maintain their profits during the economic downturn. The expectation is that the increased rate of return will carry them until better times return, despite the fact that this policy will drive a certain percentage of their customers into extreme economic difficulty and raise the rate of payment defaults...
This strategy is based on the assumption that the rebound will occur before the balance tips the other way—when the losses from the ever increasing numbers of defaults overwhelm the company’s ability to squeeze greater income from those credit card holders who have not yet succumbed to economic ruination, which is brought on, in part, by the very policies carried out by the companies.
Clearly, this model leads to disaster if the economic crisis continues for longer than expected. However logical it might appear for the banks to reduce the financial stress on borrowers so that they can survive over the long term and continue making payments, the incessant need to maximize profits in the short term in order to maintain investor support makes this latter strategy impossible for capitalists. Thus, the “logic of the market” leads to irrational and destructive results...
The business and financial elites are caught in a contradiction. On the one hand, retailers are desperate to get people spending... On the other hand, the banks... are driven to jettison those card holders they consider risky while squeezing the remainder for all the revenue they can get...
With rising unemployment and other stresses on the economic condition of increasing numbers of middle and working class people, this contradiction will only get deeper.
http://www.wsws.org/articles/2009/may2009/cred-m28.shtml