May 22, 2009
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News: Retailers Concerned About CC Provision
Retailers have been screaming foul play against credit card companies regarding the growing number of premium cards that come with higher interchange fees. Additionally, they are voicing concern over a provision of the new credit card reform legislation which will make it more difficult to offer consumers on the spot cards for use with big ticket purchases. The cards which are typically applied for and issued at the retail store level will most likely not have the same perks and rewards. The new bill bans lenders from issuing credit cards to consumers without considering their repayment ability which means banks will be required to conduct a more thorough credit investigation on the applicant. Meanwhile, retailers worry the consumer could possibly move on to another store or delay making the purchase. Mallory Duncan, Senior Vice President of the National Retail Federation expressed concern saying the amendment was “potentially very problematic.”
Many of these types of credit cards are offered by retailers like Home Depot and Sears where buyers will go to purchase big ticket items under emergency conditions when an appliance breaks down. Such cards will generally defer payment and offer no interest for a number of months. Senator Robert Menendez (D-NJ) authored and proposed the amendment in the final hours of the Senate debate which came as a surprise to retailers and credit card companies alike. Mr. Menendez intended that the amendment apply to all types of cards and not only those store branded types which cater to the big-ticket items. Travis Plunkett, the Consumer Federation of America's Legislative Director believes the added provision will solidify lawmakers’ goal in providing a sustainable credit market. Furthermore, Plunkett indicated that the Federation supports deferred payment credit plans that are fair and provide full disclosure of terms and conditions in language the consumer can understand.
Mr. Duncan says the Federation was examining the provision to determine how they would react to assure compliance. If they find the provision inhibits consumers’ ability to acquire credit cards quickly in the wake of an emergency, retailers would most likely takes steps to have it rescinded.