Obama and the Consumer Financial Protection Bureau.

I took time out from job hunting today to read an announcement by the CFPB.

Obama's CFPB is backing off a rule to limit big upfront fees that banks charge on credit cards. I feel better already---if I was a bank, which I am not.

That seems like a good idea so why did they back off the rule? Because they have established a better rule. A rule the banks prefer.

The CFPB's new rule allows banks to charge whatever fees they want up front. That's right. The bank can issue you a credit card with a $500 limit and charge you $100 or more up front, there is no limit, before you even use it. The CFPB however is restricting the bank from charging you more than 25% of your credit limit each year. Wow that's relief.


Explain that to me again. Here goes. The bank issues you a credit card with a $500 limit. The CFPB allows the bank to charge you whatever fees the bank wants up front, say a $100, just for issuing you the card. You start using the card and the CFPB allows the bank to charge you up too another $125 (25% of the credit limit) per year in fees to use the card. That can not be right. Can it? I do not have the link but the AP headline is "Consumer agency softens fee limit." Google it, read the whole story, deboggle your mind, deny yourself any logic and then start your own bank.

Here is the rub. The CFPB was going to be a lot tougher on the banks. The banks objected and suggested that the CFPB's new rules would hit borrowers with poor credit histories especially hard. Why is this true? Because the banks argue they need to take advantage of those people who have poor credit. Ergo, the CFPB soften its rules. By now your head should be scrambled trying to understand the logic of the rules and the CFPB. I know mine is.

Here is my summary.

The CFPB is enabling banks to charge people with little money and little credit up to $225 for a little credit card with a $500 little credit limit. This will ensure that little people with little money and little credit can get a little credit card, they can little afford to pay for, to charge items they can little afford to pay for, and eventually default on the little  card resulting in a little worse credit for the little consumer.

I don't get it either, but then I am just a little consumer.  How am I to understand these financial wizards that Obama puts into office with his new-fangled protection bureaus?


Do you dare to read more..........