This is the Cato Daily Podcast for Friday, May 22nd 2009. I'm Caleb Brown.

A law now in the works will regulate credit cards like never before.

Our Calabria, Director of Financial Regulation Studies at the Cato Institute, says the cost of

credit and liquidity to everyone, especially those who need it, will be on the rise.

Well, there are a variety of pieces of legislation and it's very far-reaching,

some of it dealing with you know

changes in terms of when you're late and what changes can be made to raise

interest rates for instance one of the things that has been regularly talked

about is what's called universal default, where if you become

late on a debt that is unrelated to your credit card, can the credit card company raise your

rate based on that?

And this would largely change that. So for instance, the

discussion is if you're suddenly a different risk, you're late on your car loan, for instance,

credit card companies have traditionally, or at least in the last several years raised your rates

That will probably be much more difficult in the future. It certainly would change in terms of the rates on loans you've already made.

And some of these practices weren't necessarily transparent.

For instance, it was quite common that if you had different rates, like let's say you had a

introductory rate of very low or like zero or 2% or something, the debt you ran up on that once your introductory rate was gone,

usually what the credit card company would do is if you sent in a partial payment you

owed $5,000 and you sent in a check for 3,000, they would put that 3,000 toward your lowest

rate so that the higher rate you had would continue.

So that's been switched.

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