Lightspeed Finds Card Issuers Making Changes to Credit Terms

Federal regulators — including the Federal Reserve, the Office of Thrift Supervision, and the National Credit Union Administration — will meet this week to vote on new regulations expected to limit issuers’ ability to reprice existing balances and make payment allocation more favorable to the consumer.

Based on Lightspeed Research’s analysis of changes in terms notifications mailed by issuers, there is little indication that issuers are proactively addressing these pending regulatory changes.

The Lightspeed Research Financial Services Group, a leading online global research provider, today announced the results of their latest Credit Card Terms Tracker. This monthly report provides detailed insights into the changes in terms notifications mailed by the top 10 U.S. credit card issuers in the past month.

Key findings in the December report include:

• A large volume of notifications indicate that issuers have increased variable-rate APR margins, likely to compensate for benchmark interest rates (Prime and LIBOR) that are at historical lows.
• Issuers such as American Express, known for their focus on building loyalty with higher- spending customers, have begun to scale back rewards offerings on selected products, such as their recently renewed Delta Skymiles program, while other issuers are adding fees to various points redemption options.
• Chase has instituted a $10 monthly service fee and increased minimum payments from 2% to 5% on selected accounts based on the APRs and revolving behavior.

“Our research indicates that the card industry continues to leverage the pricing tools available to them as they wait for confirmation of the new regulations this week,” commented Greg Flemming, head of the Financial Services Group. “It will be critical for payments executives to continue monitoring competitors’ terms changes through 2009 as issuers begin to implement the mandated changes in different ways and on varying schedules.”

About This Research

On a monthly basis, Lightspeed Research gathers Change in Terms statements directly from customers of the 10 largest issuers in the U.S., as well as from other mid-tier issuers. The information from these statements is compiled, analyzed and synthesized to provide clients with a report that has detailed breakdowns of changes in cardholder terms including interest rate calculations, billing period/cycle changes, penalty pricing, and fees.