The Credit Card Accountability, Responsibility and Disclosure Act of 2009 will require that companies regulate monthly billing patterns and give 45 days’ advance notice before increasing interest rates, fees or finance charges. These regulations are creating competition among lenders like American Express Co. that use reward points to keep customers with top credit scores.
“The CARD Act is leading all issuers to the top of the credit food chain, and more competition is never a good thing in any industry, regardless of the product, but particularly in the relatively homogenized card space,” Jason Arnold, an analyst at RBC Capital Markets in San Francisco, said in the report.
The average credit score among AmEx cardholders is 754, compared to 722 in the rest of the industry, according to the report. Biotechnology company manager Walt Serafin is among these borrowers. He used reward points from his credit card paired with a holiday discount to purchase an Apple iPhone.
Borrowers with low credit scores may encounter new membership fees, aimed at making up for lost revenue from the Credit CARD Act, according to the report. These consumers may have already encountered difficulties applying for credit, caused by tight lending standards. A Federal Reserve Board survey of senior loan officers showed that a significant number of commercial banks reduced credit limits and lending to customers with high credit card debt in the fourth quarter.
A separate report from the Fed indicated that many consumers were interested in paying off their debt in the fourth quarter. Revolving consumer credit, which is often tied to credit cards, fell at an annual rate of 13 percent in the fourth quarter.
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