Shortly after the Biden administration released its rule to expand the government’s price controls over credit card late fees, The James Madison Institute issued a statement.
Milton Friedman once said, “If you put the federal government in charge of the Sahara Desert, in 5 years there’d be a shortage of sand.” This is what will happen if the CFPB succeeds in bringing the government’s current price cap on credit card late fees ($32) all the way to $8. Like most feel-good policies, this one — based on fantasy political math that is not grounded in reality — will end in ruin.
The institute argues that banks, particularly small community banks relied upon by many Floridians, will likely respond to this new regulation by increasing their fees and reducing their minimum account balances. They predict this will lead to increased income inequality despite promises from the Biden administration to mitigate wealth distribution. Additionally, they foresee larger Wall Street banks growing even more substantial while small community banks across the country continue to dissolve, shrink, and consolidate further than they have over the past decade.
The statement concludes with a call for the Biden administration to abandon its tax-and-spend inflationary policies and allow market forces to operate freely instead of implementing another "myopic big-government proposal."
The James Madison Institute is a 501(c)3 organization dedicated to promoting limited government, economic freedom, federalism, and individual liberty coupled with individual responsibility. The institute conducts research on issues such as criminal justice, health care, taxes, and regulatory environments.