New US rules curb bank fees - and profits

"Credit-card rules that took effect last year curbed interest rate increases and late fees, and almost stamped out charges for exceeding credit limits, according to the new U.S. Consumer Financial Protection Bureau," Bloomberg reports here.

"Before the new rules, 15 percent of existing credit-card accounts were re-priced with a new interest rate each year; that has fallen to 2 percent, according to an agency study released today. Over-limit fees -- charged when customers exceed credit limits -- have 'virtually disappeared,' the study found.

"Late fees fell to $427 million in November, less than half the $901 million total for January 2010, the last month before the rules took effect. The average late fee declined to $23 from $35 over the same period..." The commission's acting chairman, Harvard Prof. Elizabeth Warren, will tell more in a news conference today.

And what's the cost of all this consumer protectionism? Bank of America Corp. said yesterday it's had to write off $20 billion in addititional losses to its credit card business (the former MBNA Corp. of Wilmington, for which BofA paid $35 billion five years ago) due partly, the bank says, to Warren's and Congress's fee restrictions and partly, of course, to BofA's own dumb loans.

BofA has cut at least 4,000 jobs in Wilmington to try and restore profitability, and we have to wonder if Visa and MasterCard lending will ever be viable again, though BofA archrival JPMorgan Chase & Co. seems to be making a go of it.

Will this last? Janney Capital Markets analyst Thomas McCrohan noted in a report last week that a recent Senate hearing on strict proposed debit-card free limits was noticeably less pro-retailer, and more pro-bank, than in the last Congress. Warren will have a tough time getting confirmed by the conservative-leaning Congress.

Can a nation that's been getting more and more permissive about gambling, drugs and sex keep getting stricter about making it tough for people to borrow more money than is good for them?