WASHINGTON

WHEN making policy, particularly where it could affect the economy and people’s financial future, it is important to remember the old adage: “First, do no harm.”

This could be especially true of the Federal Reserve Board’s new set of proposed rules regarding low-limit credit cards. The Fed’s proposal contains a number of new regulations to protect consumers, including holding card issuers to higher standards in disclosing terms to customers. The new rules, if approved, would also dictate how some credit-card companies price their products and require consumers to pay most of the fees necessary to activate the card up front, instead of paying them over time.

Making sure that consumers are fully informed before they decide to open a credit-card account makes good sense. However, the price-control aspect of the rule ignores that most low-limit credit customers do not have the cash to pay the fees up front in the first place, which could drastically limit credit opportunities for otherwise qualified applicants.

In today’s world, credit cards are vital tools responsible for driving a wide range of commercial activity. One can scarcely rent a car, book a flight or book a hotel room without one. The mortgage crisis and tightening credit conditions have made it increasingly difficult for many consumers to gain access to credit — especially those with credit-history problems. It has been estimated that over 70 million individuals in America do not qualify for a “prime” credit card. This puts them in the low-limit, or “subprime” category.

Of course, the credit crisis is having a profound effect on our economy. The current situation makes it even more important that federal regulators strike a balance between protecting consumers while also protecting fair access to credit. Low-limit-credit-card providers charge fees to their customers because they are in a higher-risk category.

Pricing a product to risk is a well established principle of our market economy that can be found in a range of commercial transactions. Just as auto-insurance companies charge higher premiums for customers with fender benders on their record, low-limit-credit-card providers charge more for those with dents in their credit history.

The federal government is one of the main reasons why low-limit credit is more expensive to obtain. Unlike prime issuers, low-limit-card issuers are legally required to hold much of their funds in reserve, sometimes up to 56 percent. Should regulators prevent companies from pricing their products to risk, many if not all of these companies would no longer be able to meet these requirements and cover their costs. Such an outcome would mean that low-limit credit disappears; while millions of otherwise qualified applicants would be forced to turn to pay lenders, pawn shops, or perhaps more risky and troubling options when confronting a financial crisis.

The millions of families, individuals and small business owners who would otherwise qualify for low-limit credit deserve a second chance to get back on their feet. It has been estimated that low-limit cards are responsible for generating over $2 billion in commercial activity a year in our economy. If low-limit cards were regulated out of the economy these important dollars and commercial activity would disappear — causing further injury to our already ailing economy.

The Fed should be commended for its move to hold credit-card companies to high standards in disclosing obligations to consumers. Likewise, issuers should be required to use, consistent stringent standards when selecting applicants to receive a card. The Fed should also look at common-sense ways to make credit safer and more accessible to consumers without dictating the pricing and structure of how fees apply. It is vital that we do not allow abuses in the marketplace. But as regulators move forward, they should seek changes to protect consumers while avoiding price- control policies and restrictions that will do more harm than good.

Karen Kerrigan is president of the Small Business and Entrepreneurship Council.