I'm sure that paying a premium to borrow money once you are a credit risk would be considered "fair" by many. But, the example that you've posed is a straw man. Of course you'd charge a drug addict higher interest than the the US government.
The problem with credit card companies is that they loan the initial money at one price, and then adjust the price dependent on changing credit scores, insurance claims or whims.
And, a large percentage of a credit card companies, profit isn't in the initial interest rate. The profit is made in late fees, over limit fees and credit rate increases. So, they have a vested interest in the customer defaulting, being late in their payments or in going over their limit. And, when those fees are assessed, the customer generally has little recourse.
I agree with you vastly more than I disagree, but will observe that if you manage your debt reasonably, you have the ultimate recourse when your CC company changes your terms: Fire them. Pay that debt off, possibly by borrowing from another company willing to extend you terms more to your liking.
I agree that people to whom no one will lend more money are at a great disadvantage. I don't see any way to fix that, as preventing CC companies from offering variable APR offers in the future will likely make things worse for marginal customers; it will just make the companies completely unwilling to extend them credit. Embargoing consumers who are already suffering doesn't help them in the short term.
Unfortunately, if you "fire" your credit card company by paying off your balance and canceling the card, you also reduce your credit score, leading to potentially worse terms for your next loan.
As stated in the original article, the second-worst kind of credit card user from the issuer's POV is the one who immediately pays down their balance each month, without ever incurring interest or late-payment fees.
This is possible only because of the altogether too-cozy relationship between the credit rating agencies and card issuers. I think any regulation of the lending industry should start with the credit rating agencies, and move on to the banks only after they've established effective oversight and consumer protection in that space.
(Incidentally, my disgust with the normal lending practices in the credit card market is the reason that the only one I will carry is a small-limit emergency card issued by my local credit union. Since they're a member-owned not-for-profit institution, I have far more trust in their desire to serve my financial needs, rather than trying to screw me over for a buck.)
Pay the balance down to zero, and because of the strange quirk in the FICO scoring system, stop using it, but don't close the account. "Problem" #1 solved.
The problem with credit card companies is that they loan the initial money at one price, and then adjust the price dependent on changing credit scores, insurance claims or whims.
And, a large percentage of a credit card companies, profit isn't in the initial interest rate. The profit is made in late fees, over limit fees and credit rate increases. So, they have a vested interest in the customer defaulting, being late in their payments or in going over their limit. And, when those fees are assessed, the customer generally has little recourse.