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Comment by _heimdall | Hacker News Reader

I'm always a bit annoyed by the need for new rules and legislation similar to this.

If consumers aren't willing to risk paying late fees, just don't use credit cards. They are a convenience product at best and a predatory lending mechanism at worst. There are benefits to credit cards, don't get me wrong, but they aren't a must and we can choose to live without them.

Why do we need yet more government intervention to solve this? How does the government actually land on $8 as a universal, reasonable late fee? Do they known what collections actually costs, or should cost, credit card companies? Do they know what every consumer would deem a reasonable fee? And more importantly, do they know that credit card companies won't recoup this amount through some other means, say by slightly higher rates to consumers or merchants?

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Do you feel the same way about the limited liability offered to investors in corporations? After all, if they don't want financial risk, they should just not invest in anonymous businesses that they don't have any control over.

Which obviously I'm being oblique, but of course the government should do things that ensure corporations benefit society, because that's why government has regulations to encourage their formation, for the benefits they can bring.

> Do you feel the same way about the limited liability offered to investors in corporations?

I think you meant this a bit facetious, but yes I do feel similarly there. I don't expect investors to he held liable for internal decisions made by companies, but absolutely if an investor doesn't want the financial risk they shouldn't invest. I'd argue that we only have those liability protections to keep people investing, without that our monetary system crumbles.

> of course the government should do things that ensure corporations benefit society

That only seems necessary if society has become so large and outsourced that we can reasonably make impactful decisions as consumers. Consumers should be close enough to the companies that they invest in or work with to know generally what that company does. You obviously don't need to know all the details, but at least enough to know that you generally think they're on the up and up, and if not you just take your business elsewhere.

The necessity of government involvement, in my opinion, means that a society and the lives of it's citizens has gotten much to complex, and is ultimately then much too fragile.

> I don't expect investors to he held liable for internal decisions made by companies...

But they are liable up to and including the total amount of their investment.

Some may say that this is to enable people to pool their resources to accomplish goals that are beyond what the individuals can accomplish on their own without losing everything if their plans go awry, best laid plans of mice and men and all that...

> But they are liable up to and including the total amount of their investment.

That's how it should be! I don't think I explained myself well there.

I was thinking specifically of legal concerns. If a company breaks the law, I wouldn't expect investors to be held criminally liable unless they reasonably knew what was done. I would expect them to be financially liable if the company value falls and their investment loses value.

How are investments supposed to work if the upside is unlimited but the downsides are mitigated by regulation? Investing is a risk, effectively gambling. You should expect that anything you put in can be lost.

The downside in your scenario is limited by regulation!

It's hilarious that limited liability is an obvious assumption for how the world should work and then telling companies that they don't get to offer high interest unsecured loans that also have punitive fees is some kind of perilous overreach.

> It's hilarious that limited liability is an obvious assumption

I must have gotten myself lost if my comments read as though I was arguing that limited liability is a good thing. I guess if you consider limiting investor liability to criminal activity they were aware of, that's some form of limited liability.

But I don't agree that liability should be limited even when someone is, or can be, aware if the risks they sign up for. I'm not saying anyone should tell companies they can't offer high interest unsecured loans - I'm only saying that consumers don't have to take the loans.

So the regulation protecting the monetary system is good and the regulation restricting corporations is bad? Got it.

The first one is not a “regulation” in the normal meaning of the word because it doesn’t restrict the actions of private individuals, but rather the government (in this case the courts). Usually we call things that restrict the power of the government “rights” not “regulations”.

If a business harms me, those laws prevent me from seeking restoration from the investors.

Both are bad in my opinion. We shouldn't have a need regulation to protect our money, that'd a sign that the money itself isn't sound and the system is too fragile.

Then why allow interest and late fees at all then?

The credit card companies are still free to charge interest at the agreed upon rates, but now they can’t add a $50 fee on top because of what is a banking error for most people (they had the funds but perhaps in a different account from the autopay).

If this change actually affects the companies bottom line, I would imagine we will see a small increase in the interest rates being offered to cover the expense. Realistically though, banks make all of their money from the interest on the cards and the late fees are icing on the already overflowing extravagant cake.

> Realistically though, banks make all of their money from the interest on the cards and the late fees are icing on the already overflowing extravagant cake.

Standard accounting principles make it much more black and white. The banks' financials already account for late fees taken in. Removing the late fees alone would decrease revenue and hurt financial projections. They either eat this out of the kindness of their hearts, or more likely find other ways of taking a similar amount of money from customers or merchants.

People are really, really, bad (in general) at correctly managing these things, whereas companies are really good at it.

The sad truth is that for the financial health of much of the population, credit cards should be forbidden entirely, but that would cause too much howling because you can't just "forbid them for poor people" even though those are who are taken advantage of the most.

A "credit card" where it's not really a loan would do wonders. Standard limit based on your income and credit rating but you have to pay it off in full at the end of the month like any other bill else it gets shut off like a utility. You can still get the points, perks of spending other people's money/consumer protection, and 30 day float to smooth over paychecks but no debt.

Like this? https://joinfizz.com/

This is brilliant. I hope it catches on for more than just students.

This is a really close hack to what's needed, basically a secured card that doesn't report as one.

Apart from the limit, that's basically what a "charge card" is, and it's how American Express cards used to work, but I think they've converted all their consumer-oriented cards into credit cards.

That's a much bigger problem than CC late fees.

We can't legislate this away. If that's the problem we're chasing, a better approach might be investing in better financial education or decreasing the wealth gap.

Totally agree. This is a problem that is easily solved by the free market. You get a high fee once, you will learn the lesson and either be more diligent or use a bank that has lower fees.

I think it's just a cheap shot by some politicians to get easy points. It always sounds good when they punish big greedy banks/corporations. But in reality those small regulations slowly add up each year and in the long run it makes it harder for smaller players to get into the space. And lack of competition makes it easier for bigger players to abuse their position. So the opposite of the original intent. And the cycle continues. More intervention needed etc.

> the opposite of the original intent

Agreed, I see this occur over and over, what seems like reasonable or good intervention often backfires in the most unexpected ways.

> If consumers aren't willing to risk paying late fees, just don't use credit cards.

Half of all people are worse than average at that sort of planning ahead.

I don't think that's something the government can regulate away.

I agree but the government could try and solve this problem at the source by mandating the teaching of personal finance in public schools. It may not actually do much good, but we should at least _try_ it.

Then again, the federal government is rarely successfully at addressing problems at their source so I won't hold my breath.

Nor should they honestly. Lets not subsidize irresponsibility.

Thats not to say there shouldn’t be a reasonable cap on late fees. It is to say that even if the government could save people from all the consequences of their negligence, they should not.

But the government can make it harder to take advantage of people.

That's really just a game of whack-a-mole unfortunately. There's no way to regulate away all ways a person can be taken advantage of. There isn't even a way for regulators to clearly distinguish between a person being taken advantage of and a person knowingly agreeing to something.

Late fees are a great example actually. I know my bank charges late fees and I know its roughly $35. This new federal rule deems that as me being taken advantage of, but I was okay with the fee as-is. The government somehow decided what was an exorbitant fee and how much it should cost banks to deal with past due payments when a customer is late. How can they really decide that, and why should they try?

> That's really just a game of whack-a-mole unfortunately. There's no way to regulate away all ways a person can be taken advantage of.

That's okay, it's fine to hit a few big ones when it's convenient.

> There isn't even a way for regulators to clearly distinguish between a person being taken advantage of and a person knowingly agreeing to something.

> Late fees are a great example actually. I know my bank charges late fees and I know its roughly $35. This new federal rule deems that as me being taken advantage of, but I was okay with the fee as-is. The government somehow decided what was an exorbitant fee and how much it should cost banks to deal with past due payments when a customer is late. How can they really decide that,

They didn't decide you in particular were being taken advantage of. Just that it's statistically causing people to be taken advantage of.

And what's wrong with them deciding $35 is too much? The change doesn't hurt you.

> and why should they try?

To whack some of the moles!

Don't let the perfect be the enemy of the good.

Should they be subsidizing that behavior on the backs off of the half that do not?

Sorry, I don't follow. Who is the "they" here?

If it's the government, no they shouldn't be subsidizing this (or anything else IMO). If its banks, they can subsidize whatever they want as long as their customers are willing to allow it.

If the end result is a society full of destitute people with all the associated problems it brings for everyone in said society, then yes.

So, you don't trust your government to do the right thing, and also fully expect banks to screw you. When you talk about living without a credit card, do you mean cash at physical shops ?

Feels like you're advocating for a very peculiar way of life.

> Feels like you're advocating for a very peculiar way of life.

That's all based on perspective, but yeah I would expect plenty of people to find my life peculiar.

For me it isn't about trusting my government, though the US government was originally based on distrust. The government has to earn and retain my trust, it isn't a given or free.

There are alternatives to credit cards, including debit cards. Cash is also still viable in the US, though I know its becoming much less common in other parts of the world.

I personal don't think spending cash in physical shops I'd peculiar, but maybe I'm just that out of touch?

Banks are free to not participate in making credit cards if it’s too expensive for them.

i avoid them like the plague because i hate owing money, but i'm not from the US and as far as i understand, having a credit card is really important for building a credit score there isn't it? would not holding a credit card not also make it harder to say, find places to rent?

You have better fraud protection with a credit card and you can generally get better kickbacks (some fraction of merchant fees - Amazon Prime credit cards have 5% kickbacks meaning if you buy something for $100 with it, you get $5 back).

I actually use credit cards most of the time, mainly for fraud protection. If I was in a position where I was regularly concerned with missing a payment, or the fee I'd be charged, I'd definitely consider a different form of payment though.

There are benefits for sure. Maintaining a good record on your credit card will help your credit score, though that only matters if you plan on regularly borrowing large sums of money.

I haven't rented in a while so I'm really not sure on that one. Most places I rented over the years assumed you paid by check every month, though its been about a decade now so that very well could have changed.

> I'm always a bit annoyed by the need for new rules and legislation similar to this.

Before the Obama-era credit card law, if you missed a single payment at a bank your entire balance would revert to the "default" interest rate, which was close to 30%. Then, every other bank you had debt with could also change your interest rate to the crippling "default" rate.

I think that was a good change and I think this is a good change. Credit cards are a widely-used financial tool that can provide a lot of benefits. If someone is on a fixed income or working for low wages, I want them to have access to that tool too without unneeded risk. People go to the hospital, relatives die, a computer fucks up, and it's suddenly really easy to miss a single payment. And given the history of banks' nasty policies towards consumers, we have zero reason to assume they aren't gouging.

> How does the government actually land on $8 as a universal, reasonable late fee?

If you read the article you will find a link explaining this to you.

> They are a convenience product at best and a predatory lending mechanism at worst > just don't use credit cards > Why do we need yet more government intervention to solve this?

I guess I'm a bit confused about your position here - you note that it's predatory, and then you continue on as if it's an easy choice: maybe we disagree on what predatory means?

I can't recall a single class in school or anywhere else that taught me about the dangers of credit cards and debt that grows cumulatively. Yet credit cards are aggressively marketed like candy through the mail and every time I shop at a big box store or even online. Not to mention other kinds of debt like student loans, car loans, mortgages, etc.

A lot of people don't even begin to understand the things they need to be aware of to make a truly informed decision to take on debt: compounding interest, amortization schedules, inflation, their budget and runway in case their income stops, etc. They do not do some quick back of the napkin math on how much extra they'll be paying during the lifetime of the loan, and whether that extra cost is worth it. And credit card companies are fully aware of this, and leverage it for maximum benefit of course. They jump at you at the situation where you're least likely to stop and think: you're spending a surprise 1000 bucks to replace your busted heater which is really gonna eat into your food and gas money - wouldn't it be great if we gave you 100 dollars off of that right now? Just sign up for a store card, it takes 2 minutes! Also, the minimum payment will be so low! That'd be the "predatory" part.

Just "choose to live without them" is not effective if you're both underinformed and poor, AND companies are incentivized to push debt on you. Heck - when I was a (supposedly educated) college student, I was hit by an overdraft fee: I bought some lunch, and later a snack from the vending machine. And I paid 20 + 20 dollars in fees for the privilege of 2 transactions totaling about 7 dollars. It made no sense to me: how could you spend money that you didn't have in your account? It just wasn't a thing in my home country. Should I have known better and read 15 pages of small print? Yes. Did I? No. When I called, the bank said I should be happy they've opted me in to this "service". If I had known, I would have just not made those purchases. I also ran into trouble trying to opt out. Predatory.

How do you propose we bridge a massive gap in financial literacy when we as a society are struggling with basic literacy and financial stability? I don't mean like 20 years in the future ("better financial education" which is the same as "hopes and prayers"), I mean right now. So that leaves us with not much other than regulation.

What this rule cuts down on surprise fees, which isn't nearly a complete fix. But it's an okay incremental improvement: it's one less thing to watch out for. Either offer a simpler, easier to understand financial product, or don't. There's no god given right to a profitable business, especially when it's not based on a mutually beneficial transaction.

I really don't know how to phrase it empathetically, and I know its an unpopular opinion when spoken, but if someone chooses to take on debt they can't afford then they have to deal with the consequences. What absolutely should be done, though, is to make sure that companies are kept 100% on the hook for their actions. Governments shouldn't bail out banks when they get caught holding an bag full of nothing but bad debt. Student debt for example, shouldn't be treated ant differently from other debt in bankruptcy proceedings. Companies should be legally liable for advertising that misrepresents their products.

Ultimately companies advertising debt products or making it easy to sign up isn't forcing anyone's hand. We all make our own decisions, and if that includes signing contracts that we didn't read or understand then I'm not sure what else can be done.

With that said, financial literacy and our education system in general are absolutely terrible IMO. I could care less if someone learns integrals in school, or practices dissecting a baby pig in biology class, if they don't learn the basics of how the society we've built works. Kids should learn finances, contracts, and politics above all else. Learn how money works, learn how how our laws and political system works, then if you have time read Shakespeare or play the trumpet.

I know I sound arrogant or crass, but these skills are extremely important and seemingly entirely ignored in school. We force most kids to be in school for over a dozen years. It doesn't take nearly that long to learn the few topics I called out. There will be time for biology, the arts, mathematics, history, etc. I'm not saying throw those out, just reprioritize them with an eye towards the world people will actually be in after graduation.

  If consumers aren't willing to risk paying late fees, just don't use credit cards.

Right, if you have an unexpected emergency (like repairing the car you depend on to get to work), just pay for it from your trust fund! /s

This is a deep rabbit hole you're digging towards.

I'd argue that if you can't afford to repair your car you can't afford the car. And if we've built a society where personal ownership of a car is a necessity we have failed on a fundamental level.

Having an open line of credit is helpful for sure, but you shouldn't depend on it. Having to dip into debt to cover an expense means you've fallen behind, and if you couldn't afford it before you are less likely to afford to dig out of the hole now. Not having a credit line means you may run out of money, but it also means you can't go into debt.

  Having to dip into debt to cover an expense means you've fallen behind

It's fine to borrow to fund capital expenditure. Soon after I started working (not in the US) I got a job which paid 25% more than my first job. But I needed a reliable car to get to work. After six months of struggling with an unreliable car, I borrowed money to fund 2/3 of the price of a new car.

This wasn't because I had 'fallen behind'. The reliable car was a good investment, and it was fine to fund it with debt.

Car repairs extend the life of a capital asset. It seems reasonable to fund them with debt.

What you're describing isn't an open line of credit though. It sounds like you took on that debt in as a calculated risk to help pay for a one-time expense that was a luxury rather than a necessity.

I was replying to the scenario of having a credit card to pay for an unexpected expense that otherwise couldn't be paid for. That's extremely helpful in the short term, but risky long term since presumably if it couldn't be afforded before its that much harder to dig out from under the new debt.

I wasn't meaning to argue that debt is always bad. I may have just explained myself poorly if it read that way.

I think we're looking at things in a similar way. The key point of differences I think are:

1. Car repairs are capex, even if their exact timing is unexpected.

2. When it comes time for a car repair, you may not have time to apply for a loan specifically for that purpose. In that case, a credit card is a reasonable choice.

Perhaps car repair costs are predictable over 1 year, but not over 1 month.

It's sad that:

- many people can't distinguish between using debt to fund an investment in the future, and using it to fund current expenditure

- many people in the US live in places that aren't dense enough to make public transport viable

> many people in the US live in places that aren't dense enough to make public transport viable

Well that's for damn sure. We (collectively) never should have allowed our society to bake in an assumption that everyone will have access to a personal vehicle.

A huge majority of the US is extremely difficult to live in unless you (a) own a reliable vehicle or (b) are okay with being largely self sufficient and living a hyper-local lifestyle.

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