Universal default: Congress is codifying the unwise decision of the Federal Reserve last year to ban so-called universal default. Under this longstanding practice, credit card issuers would sometimes raise rates as a result of defaults on a different credit card or loan, because these defaults may have signaled a weakening in a consumer’s credit profile. This is a sensible risk management practice similar to insurance companies raising rates for drivers who get traffic tickets, even if it wasn’t while driving the car that was insured. The issue is that the overall risk profile is changed because of certain types of behavior, and issuers could price this into rates..
