The scheme requires that credit card companies charge a minimum fee that is not simply outstanding finance charges, but also includes at least 1 percent of the principal owed. J.P. Morgan and Citigroup are concerned that this change of policy is going to lead to a new slate of defaults which will cost them a projected $500m in losses this year alone.
We’re not really sure what we think of this sort of babysitting on the part of the SEC. That some consumers are rifely irresponsible with credit certainly shouldn’t make it a legal compunction upon those of us who can handle our finances to pay more every month. On the other hand, perhaps banks like Citibank have bigger problems right now (you know, like stopping people from stealing our frickin’ credit card numbers) than a scheme that — misguided or not — seems to be an honest attempt to help consumers get out of an infinite recursion of fees and charges mounting on top of their existing credit card debt.
Boo hoo, Citibank, you spectacular incompetents.