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credit and securitization August 7, 2008

Posted by Bradley in : Uncategorized , trackback

Before the collapse of the sub-prime lending market the securitization industry tried to fend off a lot of attempts to regulate sub-prime lending by arguing that to do so would deprive consumers of needed credit. The strategy worked reasonably well then so why not keep pushing it? The American Securitization Forum comments on proposals to regulate unfair or deceptive practices with respect to credit cards as follows:

We are concerned, however, that the Proposed Rule too greatly restricts issuers’ ability to re-price interest rates, apply payments, and charge appropriate and disclosed fees. As drafted, the impact of the Proposed Rule’s restrictions on pricing will likely limit the scope and increase the cost of credit products available to consumers because, in part, it will heighten risks and increase costs associated with credit card asset backed securities (“ABS”) for secondary market participants that will necessarily be passed on to consumers. In contrast, a proposal that preserves credit card issuers’ ability to re-price for borrower default risk, maintains their flexibility in applying payments, and protects issuers and investors from litigation risk in connection with existing accounts, will ensure that consumers enjoy continued access to low cost and convenient credit products and services.

Perhaps there’s a simpler solution – if consumers weren’t exploited they wouldn’t feel the need to litigate?

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