I feel badly for many of the consumers who lost or were on the verge of losing their homes before the federal government intervened to bail them out. Many of these homeowners were put into dire straits by a sudden job loss or some other personal calamity. Some were duped into taking on sub-prime and other questionable loans. Many others, however, were victims of their own excess, buying homes at way higher prices than prudence would dictate and leaving themselves vulnerable when the housing bubble burst.

Now, as we eagerly await the economic recovery, I worry about the mounting credit card debt that many Americans are piling up. 

According to “Vicious Cycle: How Unfair Credit Card Company Practices Are Squeezing Consumers and Undermining the Economy,” a report released by the U.S. Congress’ Joint Economic Committee in May, U.S. revolving debt, made up almost entirely of credit card debt, was about $950 billion in March 2009.

The report further noted, “As household wealth has declined in the downturn, more American families are facing financial distress due to high debt burdens. In 2007, before the recession began, 14.7% of U.S. families had debt exceeding 40 percent of their income."

What makes this all the more disturbing is this tidbit from the report:  In the fourth quarter of 2008, 13.9% of consumer disposable income went to service this debt.  That’s good for credit card companies, but bad for pretty much any other type of business.

“Vicious Cycle: How Unfair Credit Card Company Practices Are Squeezing Consumers and Undermining the Economy,”(D-IL) is among several Congressmen advocating the creation of a Financial Product Safety Commission. Among other things, Durbin and his fellow supporters want to protect consumers from surprise rate hikes, penalties and fees. In addition, Durbin has recommended that credit card interest rates be capped at 36%.

A more draconian proposal by Rep. Carolyn Maloney (D-NY) would essentially prohibit people under 21 from getting a credit card.

I’m not sold on the creation of an FPSC and certainly opposed to Maloney’s proposal to prevent youths from having credit cards. I am, however, in favor of capping interest rates and prohibiting credit card companies from changing rules without advanced announcement to their customers.

A bigger issue in the credit card debt quagmire is that too many consumers are ignorant of the danger of failing to pay off their credit card balances each month. A related problem is that too many people are living beyond their means, having to have that new flat screen or other luxury item, even if it means sinking further into debt.

Perhaps the credit card companies should have to take a cue from the liquor or gaming industries. Liquor commercials end by reminding people to “drink responsibly.” Ads for casinos offer an 800-number for those with gambling problems. Maybe, commercials for American Express, Visa, etc., should educate consumers to “charge responsibly” and avoid hefty interest charges.