June 25, 2009
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News: Discover CEO Speaks Out on CC Reform
One after the other, financial institutions are speaking out on the recent passing of new credit card reform legislation aimed at curbing the deceptive and unfair practices of the financial industry. Most recently, David Nelms, Chief Executive Officer for Discover Financial Services voiced his opinion in an interview after the company reported its 2nd quarter results. Mr. Nelms stated that the new law will bring higher interest rates, additional fees, and reduced credit availability. Discover's CEO brings nothing new to the public as he parrots other credit card majors who have also spoke out against the new legislation. Nelms says that many consumers will not benefit from the new law and the consequences will be difficult for them. Additionally, Nelms said that Discover will fare better than other credit card lenders because it did not participate in some of the alleged deceptive practices.
Nelms also stated that consumers who have maintained good credit over the past decade have actually "benefited enormously from risk-based pricing" and have received lower credit card interest rates. Most likely, these customers will receive fewer opportunities to receive low interest balance transfer offers. According to Nelms, Discover will most likely drastically reduce such credit card offers and those they do offer will probably not last more than six months. The days of 0% interest rates that last a year or more have diminished greatly. Although the lender plans to evaluate all its programs and options, Nelms said they have no plans to eliminate its cash back program.
In speaking about the current legislation circulating in the House which aims to regulate the setting of interchange fees, Nelms said any future legislation that would impose additional government regulation should be rejected by Congress. Retailers are speaking out on the high interchange fees that are charged by credit card payment networks including Discover, American Express, Visa, and MasterCard. The new legislation would give merchants a voice in how the interchange fees are set and empower the Department of Justice as arbitrator. Discover Financial is based out of Riverwoods, Illinois and is traded on the NYSE under the symbol DFS.