December 15, 2008
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News: How Will New CC Regs Affect the Market?
The new gov't regs expected to be released tomorrow (Tuesday) are considered radical by standards of the past. But the hope is for a smooth transition which promotes both harmony and stability to both the consumer and the credit card industry. With the deepening economic woes ahead, the government hopes to stave off conditions that will exacerbate the already troubled consumer confidence index. The two critical pillars which must be maintained to stabilize our economy are consumer confidence and supplier confidence. With the retail industry facing the worst conditions in 40 years, it essential to provide a medium for consumers to continue to shop, albeit with more restraint than in the past. Right now, with the mean American income dwindling and unprecedented job-loss, credit cards are one of the few resources left for the liquidity of our economy.
Banks and other credit card lenders are scrambling to prepare for these new changes. Whole product lines are expected to change. In order to hedge for what might happen, card issuers are expected to raise mean interest rates to buffet them against unexpected risks where they will be prohibited from raising rates later, until it's too late. Zero-percent interest credit cards are expected to go away.
The main reason for the government's attention to this industry right now is the importance tied to consumer spending. But, for the banks, credit card debt is a major source of revenue. The substance of our nation's revolving debit ranged around the $976.1 billion mark at the beginning of November, according to the Fed. Scores of complaint's have been pouring into government agencies over ‘delinquency' issues.
The delinquency categories have been ill-defined and the repercussions resulting from this have stirred millions of credit card holders. The main issue at hand for the banks is the troubling rise of delinquencies in the last quarterly reports, which were setting records dating back to 2002. The last rate reported was 4.9 percent.