There are basically two approaches to regulating new technology: you can prohibit it until a solid legal framework can be formulated, or you can let the industry do what it wants for a while, see what happens, and then put appropriate rules in place later.

Both China and the U.S. like the second approach to regulation and often allow new tech and new business practices free reign until problems arise. You would think, however, that the financial services industry would always be kept on a tight leash, seeing as how the stability of the entire banking system can be effected by, for example, enterprises that offer credit to consumers.

In the U.S., it actually took quite a long time for the government to wake up and realize that credit card companies were engaged in some questionable practices that were not fair to consumers. The strength of the financial services lobby in Washington is so strong that legislation was passed a few years ago barring individuals from discharging credit card debt in bankruptcy proceedings.

Since the 2008 recession, some progress has been made on behalf of consumers, beginning in 2009 when several consumer-friendly rules were passed by Congress under the Obama Administration, after some fierce political infighting. It’s still unclear how effective those rules will be; many critics have complained that the language of the legislation was successfully watered down by industry lobbyists and their patrons in Congress. The financial services lobby remains one of the strongest in D.C.

Although credit cards represent new tech and business practices that China wishes to develop, the government here has been bringing the industry along at a measured pace. This reflects the government’s generally cautious approach to banking and financial services reform. New service areas have been opened up very carefully, and the government has recently been looking closely at industry practices that effect consumers. One new rule promulgated this week deals with minors:

Banks in China should not issue a credit card to people younger than 18, the China Banking Regulatory Commission (CBRC) reiterated Wednesday in its latest list of rules and regulation.

The rules, designed to meet an increasing number of credit card complaints, stipulate that minors should receive no more than a supplementary card or bank card limited to family members of existing bank account holders. At the same time, all young card owners will have a limited borrowing limit and receive plenty of advice on how to best use their new card.

Other rules include banks being told not to charge any fees on non-activated credit cards. Moreover, when card holders have special reasons for not being able to make repayments, banks must consult with them and set up a personalized contract in order to protect their rights.

I assume that the banks would appreciate a more hands-off approach that allows them to develop additional revenue streams. But looking at what has happened in the U.S., it seems quite reasonable to put into place strong consumer protection rules now as opposed to later. Curtailing entrenched business practices is always more difficult politically than setting out a prospective regulatory framework as new technology comes online.