Auriemma Consulting Group says that "reduced revenues will drive credit card issuers to introduce cards with annual fees to consumers in the near future. Cards without annual fees will not feature rewards and will only offer cardholders basic benefits." READ MORE

Commenting that "sometimes the answer to a failure of competition is to require more competition", Ian Ayres and Barry Nalebuff have published an op-ed in Forbes titled "A Market Test for Credit Cards" that advocates requiring card issuers putting up account relationships for bid if they choose to change the terms (like interest rate) on the account. Consumers would have an option to move to a new issuer who bid for the relationship - or to stay put with the revised terms.

Senator Chris Dodd has sent a letter to to the Chairman of the Federal Reserve and the heads of key regulatory agencies "directing them to write and enforce robust rules to implement new requirements that credit card companies review rate increases on their customers implemented since January 1st of this year."

Dodd reminds the regulators that the recently enacted Credit Card Accountability, Responsibility and Disclosure Act (Credit CARD Act) includes a provision that will require credit card companies to review every six months any account where the interest rate has been raised since January 1, 2009 and reduce the rate if the customer has become less of a credit risk or the circumstances that warranted the increase are no longer present.

The American Bankers Association’s Consumer Credit Delinquency Bulletin reported today that in the first quarter of 2009 that bank card delinquencies rose 23 basis points to 4.75 percent (s.a.) of all accounts, compared to 4.52 percent in the previous quarter. (The record was 4.81 percent in the second quarter of 2005.) The balances on those delinquent accounts rose dramatically, up 108 basis points to 6.60 percent (n.s.a.) of the value of all outstanding bank card debt, marking a new record. READ MORE

In an article titled "Credit Card Issuers Raising Rates Ahead of New Law", Nancy Trejos writes for the Washington Post about how some US credit card issuers are raising fees and interest rates ahead of the date when new rules take effect early next year - "much to the irritation of Congress and consumer advocates."

The Federal Reserve has published its latest annual report on the Profitability of Credit Card Operations of Depository Institutions. Section 8 of the Fair Credit and Charge Card Disclosure Act of 1988 directs the Federal Reserve Board to transmit annually to the Congress a report about the profitability of credit card operations of depository institutions.

From the report: "In 2008, credit card banks with assets in excess of $200 million reported net earnings before taxes of 1.43 percent of outstanding balances adjusted for credit card-backed securitization, down 132 basis points or nearly 48 percent from 2007. The 2008 rate of return is very low by historic standards; well below the average rate of return of 3.03 percent since 1986."

Bankrate.com has published its annual Credit Card Study with this year's edition focusing on terms and conditions -- the fine print of credit card agreements. The survey looked at two cards from the top 10 issuers, one platinum card and one rewards card. Bankrate found that the terms and conditions varied by issuer, not by the card. Issuers surveyed were: American Express, Bank of America, Capital One, Chase, Citi, Discover, FNB Omaha, USAA Federal Savings, US Bank, and Wells Fargo.

Today's Heard on the Street column by Peter Eavis in the Wall St. Journal takes a look at American Express. Eavis writes: "The dilemma for AmEx is deciding how big its pure credit-card book, as opposed to classic charge cards, should be."

In an op-ed piece in today's New York Times titled "A Fairer Credit Card? Priceless", Ryan Bubb and Alex Kaufman write about the credit cards issued by credit unions and how those credit cards "largely conform to the new rules already, while profitably maintaining the basic features that users know and love. ... Credit union cards actually offer lower annual fees and longer grace periods than regular cards."

In an article titled "Cutting Off Mom & Pop Credit", Andrew Martin writes for the New York Times about how a "crackdown on credit limits by card companies is squeezing the nation’s 27 million small businesses, exacerbating the problems brought on by a stagnant economy."

See this earlier post about the drastic action that Advanta had to take against its small business borrowers.

In an article titled "Reg Plan Could Force GE, Retailers to Divest Banks" in today's American Banker, Maria Aspan writes that the Obama administration proposals for financial industry regulatory reform could result in certain kinds of special purpose banks, such as retailer-owned credit card banks, being eliminated.

As part of her reporting this story, Aspan spoke to a number of industry participants who "stressed that it remained early to understand the proposed reforms' full implications. But they agreed that, if the proposals are enacted as written, the days when retailers could issue their own credit cards would end — forcing the few remaining players to sell or close down their lending arms."

Discover Financial Services has reported results for its second quarter ending May 31, 2009. According to Discover, US sales volume decreased 4% versus the second quarter of 2008, reflecting lower gas prices and a general decline in consumer spending. Managed loans ended the quarter at $51 billion, essentially unchanged from the prior quarter and up 7% from the prior year. The managed net charge-off rate increased to 7.79% for the second quarter of 2009, up 131 basis points and 280 basis points from the prior quarter and the prior year, respectively. The managed net charge-off rate for the third quarter of 2009 is expected to be between 8.5% and 9%.

“While the rise in unemployment continued to have a significant impact on our financial results, I am pleased with our strong relative performance in both credit management and sales volumes,” said David Nelms, chairman and chief executive officer of Discover Financial Services. “We continue to focus on reducing expenses and maintaining a strong capital position as we manage through these challenging times.”

In an article titled "Credit Bailout: Issuers Slashing Card Balances", David Streitfeld writes for the New York Times about how some credit card issuers are "settling delinquent accounts for substantially less than the amount owed."

First Data has announced that Wells Fargo has expanded its agreement for card processing services and will move its newly-acquired Wachovia credit card portfolios to First Data for card processing services. READ MORE

TransUnion.com has released the results of its analysis of trends in the credit card lending industry for the first quarter of 2009 based upon approximately 27 million anonymous, individual credit files - providing a real-life perspective on how U.S. consumers are managing their credit health.

Nationally, the bankcard delinquency rate (the ratio of bankcard borrowers 90 days or more delinquent on one or more of their bankcards) increased to 1.32 percent in the first quarter of 2009, up 9.1 percent over the previous quarter. Year over year, bankcard delinquencies increased 11 percent from 1.19 to 1.32 percent. READ MORE

In an article titled "Capital One Looks to Adapt to Credit Card Laws", Thomas Heath writes for the Washington Post about Capital One's plans to "reinvent itself for a new age of regulation."

Capital One has launched Card Lab Connect, a credit card affinity program that Capital One says helps nonprofits expand their giving channels while providing their supporters with a convenient and meaningful way to donate to charity programs. Unlike most affinity card programs which generally cater to larger, national organizations, Capital One Card Lab Connect is available for nonprofits of all sizes. READ MORE

In a story titled "Beyond Rate Hikes: How New Law Reshuffles Cards", Maria Aspan writes for the American Banker about how credit card issuers are adjusting to the "new reality" following the signing of The Credit CARD Act of 2009 last week.

In addition to the major provisions affecting credit card issuers and their practices, The Credit CARD Act of 2009 contains a number of other provisions that will affect various aspects of the payment card industry. We've covered several of them in accompanying posts today - including:

• New limits on issuers of gift cards and prepaid cards with respect to dormancy fees and expiration dates
• Treasury review of stored value cards in context of the Bank Secrecy Act
• Federal Reserve review of the last three years of credit card issuer practices with respect to lowering credit lines available or increasing interest rates
• GAO study required of US card interchange fees

In addition, there are several other provisions including:

• Board review of small business credit plans and recommendations
• Small business information security task force
• Study and report on emergency pin technology
• Study and report on the marketing of products with credit offers
• Financial and economic literacy

The newly signed Credit CARD Act of 2009 in Section 505 requires the Federal Reserve Board in consultation with several other agencies to study and report to Congress within one year "the extent to which, during the 3-year period ending on such date of enactment, creditors have reduced credit limits or raised interest rates applicable to credit card accounts under open end consumer credit plans based on (1) the geographic location where a credit transaction with the consumer took place, or the identity of the merchant involved in the transaction; (2) the credit transactions of the consumer, including the type of credit transaction, the type of items purchased in such transaction, the price of items purchased in such transaction, any change in the type or price of items purchased in such transactions, and other data pertaining to the use of such credit card account by the consumer; and (3) the identity of the mortgage creditor which extended or holds the mortgage loan secured by the primary residence of the consumer."

The newly signed Credit CARD Act of 2009 in Section 501 requires the Government Accountability Office (Comptroller General) "conduct a study on use of credit by consumers, interchange fees, and their effects on consumers and merchants." The study findings are to be presented within 180 days to the "Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives containing a detailed summary of the findings and conclusions of the study required by this section, together with such recommendations for legislative or administrative actions as may be appropriate." The act doesn't specifically state whether the study is to be limited to credit card interchange fees or is to include debit card interchange fees as well. READ MORE

In an op-ed piece titled "Healthy Credit" in the New York Times, David Gibson, Carla Hall and Sylvia Harris propose a simple Credit Card Facts disclosure box modeled along the lines of the mandated nutrition labels that we're all familiar with.

In an article titled "Revealing the Hidden Cost Of Credit Cards" in tomorrow's Sunday Washington Post, Michelle Singletary writes that "transactors" (those who pay off their credit card bills every month - sometimes called "convenience users") may soon see the return of "widespread annual fees" on their credit cards.

Could this result in a further acceleration of spending away from credit cards and toward debit cards - as transactors finally decide the float/rewards benefits of their credit cards just aren't worth the new money they might cost?

Who wins in that scenario? Debit cards are cheaper for merchants to accept. Would they be the beneficiaries?

CCH has issued a new white paper analyzing the Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the Credit CARD Act. Credit Card Reform: An Analysis of the Credit CARD Act, authored by CCH Banking Law Analyst Katalina M. Bianco, JD, examines the Act. CCH is part of Wolters Kluwer Law & Business. READ MORE

Here's the YouTube video of President Obama signing the just passed Credit Card Act.

The final text of the bill as passed and presented to the President is available online.

That's the subtitle on a pretty pessimistic story titled "Knocked off balance" in this week's Economist about credit cards in America. "These days lenders are in a spin as they struggle to cope with write-offs, a regulatory crackdown and changes in consumer behaviour."

Separately, the Wall St. Journal covers the credit card regulatory changes with two articles today: "U.S. Banks Risk Losing Trump Card" and "Card Firms' Loss Tally: Billions of Dollars in Fees".

Jim Flaherty, Canada's Minister of Finance, has announced proposed new regulations on credit cards that he says are "aimed at limiting business practices that are not beneficial to consumers and providing clear and timely information to Canadians about credit cards." READ MORE

With all of the news recently about the just passed credit card legislation in the US Congress, we were reminded that there were some pretty obvious signals flashing a few years ago that things might just be headed off the cliff. Just for fun, read (or re-read) our colleague Bryan Derman's article from January 2005 - over 4 years ago - titled "Wither the Empire?" Bryan's article concludes: "...it may indeed be growing late in the days of the great credit card empire." Indeed.

On the Credit Slips blog, Adam Levitin takes a look at the just passed credit card legislation - he worries that "within the next year we will see a host of new, creative fees: unused limit fees, high-risk transaction fees, account review fees, line increase fees, etc." and proposes a new model of regulation for the credit card industry.