Exploitation as business model
I was happy that credit-care-reform legislation passed, but admittedly, Arnold Kling, writing for the Atlantic's business site, seems to have a point here. He cites a number of examples from an old Fast Company article of consumers falling for really bad sales pitches from Capital One, and then concludes:
Many readers of the article were appalled by the consumer exploitation implicit in this data-driven marketing that seemed to impress the magazine. I can certainly understand wanting to protect consumers from such exploitation.
My concern, however, is that ultimately consumers with low intelligence and low conscientiousness are inevitably going to be exploited. If you remove one means of exploitation, another will arise.
With tighter credit card regulation, my guess is that credit card companies will stop exploiting some of the consumers with low intelligence and/or conscientiousness. Instead, these consumers will be exploited by other lenders or by merchants. But I doubt that legislation or regulation can stop the exploitation of such consumers altogether.
That's true; there will always be ill-informed, ignorant, negligent, or just plain stupid people who will constitute the prey of unscrupulous businesses. But that unfortunate situation shouldn't lead us to conclude that all businesses should be allowed to operate so that they increase the number of ignorant and negligent by making the most of asymmetrical information. It seems that the credit-card business is one in which competitors have no incentive to compete by providing lucid explanations to customers -- it's much like the cell-phone-service business, where there's de facto collusion to offer consumers only opaque and confusing plans and take advantage of inadvertent fees and contract-breaking hassles. So with credit cards, the government is stepping in not to try to legislate away stupidity or consumer laziness, but to try to create a business environment that discourages companies from making a business model out of making society more miserable.