Credit Card Review Blog

New Regulations for Credit Card Companies In 2009

New Regulations for Credit Card Companies

The United States Federal Government is geared up and ready to tackle credit card companies. New regulations have been proposed that would make it much harder for these companies to raise interest rates.

New credit card regulations are expected to be unveiled on December 18, 2008. The regulations would mark the biggest change in the credit card industry. Regulations would affect more than 16,000 companies. Some major companies that would be affected are Citigroup Inc., J.P. Morgan Chase and Co., Bank of America Corp., and Capital One Financial Corp.

Lawmakers are attacking credit card companies in hopes to save the American consumers. American consumers have been caught in the middle of a harsh economic trap. It has become increasingly more difficult to access any type of credit including: student loans, home loans, business loans, home-equity lines of credit, etc.

Banks will be more targeted with the new regulations because banks are more likely to offer non-flexible terms and conditions. Banks are more likely than credit card companies to offer credit cards without a low introductory rate. Banks are also more likely to raise interest rates to generate revenue from lost income.

Edward Yingling, the chief executive of the American Bankers Association, said, “We think it’s really going to mark the beginning of the new marketplace for credit cards. It will in some fundamental ways change the product.”

Certain proposed regulations have become quite controversial. One of the new regulations will prohibit banks from raising interest rates “on existing card balances as long as a customer doesn’t fall more than 30 days behind on payments.” This regulation is the most controversial one because the industry argues that 30-day delinquencies are too long. The credit card industry predicts that this regulation alone could cost the industry over $12 billion in revenue each year.

There still is some time though. New credit card regulations will not take affect until at least mid-2010. If these regulations are being put into effect to help the U.S. consumer, why will they not go into action for another year-and-a-half? What is the American consumer supposed to do in the meantime?