Companies that issue consumer credit cards have been generating anger in some quarters this year by raising interest rates and other costs with an eye on padding their profit margins before federal reforms take full effect in early 2010.
The federal Credit CARD reform act is set to by fully implemented in February and will scale back the ways companies can impose punitive interest rates and high late fees on their customers.
This has emerged in recent years as a popular way for lenders to build up their profit margins, although it has also helped keep millions of consumers basically drowning in debt by making their balances that much harder to pay off.
Angered by the trend of lenders rushing to get last-minute profits from credit card customers, some members of Congress even tried to pass legislation speeding up the enactment of the reform bill, but these efforts seem to have largely fallen by the wayside.
Now, a USA Today report says that companies have been so successful at collecting last-minute cash from their customers that any financial hit they were expected to take under the new reforms should be largely recovered in 2010 or 2011.
The newspaper quoted Bruce Harting of Barclay’s Capital as saying that Capital One could see its fee income fall by 20 percent under the new regulations, but that this will be “more than offset by declining credit costs and stable margins.”
Still, credit card companies may find that their profit margins could be affected in the longer term by a trend where fewer people are choosing to use credit at all, instead favoring debit cards and cash.
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Lenders can expect a far smaller financial hit from credit card reform than some have claimed.
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