While discussing Communism on EconLog, a comment from Patrick:
If you live in California and your credit card info is stolen by hackers, you will be notified by your CC company. If you live in Texas, you won't. Because they don't have to.
My response was:
Don't forget to tell the story of what is unseen in your example.
What percent of people are financially negatively affected by not being notified in Texas vs. what they would have saved if the State forced notifications? Now compare that to how much every single credit card user in CA is affected by higher fees and costs for owning a credit card as a result of the regulations.
Also, is there a legal rule that prevents a credit card company customer in Texas from including in their agreement with the company that they are to be notified of eventsbased on specified criteria? If not, why do you think people aren't demanding such changes to their CC contract and why aren't there CC companies putting them in and making it a selling point to choose their card?
I strongly suspect that the answer to your complaint isn't that the market has failed, it's that the government regulation in CA forces people to do something other than they'd choose to do on their own and that it doesn't take into acocunt WHY they wouldn't choose that option.
Without even understanding why the market equilibrium in CC contracts exists, it's completely irresponsible to arbitrarily decide to change it based on some feel-good theory about how credit card companies "should" behave based on only the very limited information available to a bureacrat or legislator.
Whenever you hear about some new regulation or consumer protection agency, understand that what the regulation does is limit what people are allowed to do. You should always ask yourself what they didn't think about when they wrote it. What will some of the unintended consequences be?
From their position of limited knowledge, most of the time the people creating these massive regulations don't even understand how it's going to affect them directly, let alone everyone else in the country.