New US rules curb bank fees - and profits
The US Consumer Financial Protection Bureau says reforms have forced lenders to stop jacking up credit card rates and soaking customers with late fees. Will banks cut back on lending?
New US rules curb bank fees - and profits
Joseph N. DiStefano
"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?
Wow, I'm in debt. Tired of getting yanked around by Credit Card companies. I thought the debt was the result of uncovered medical expenses. Didn't realize I even had drug, gambling and sex problems until I read the blog. I'm a bad person. Wonder if my insurance covers rehab and therapy?— gee1971
Don't worry gee1971. There's a government program being developed for people like you by the eggheads down in Washington DC.- People will gamble whether or not the state runs a lottery, issues a casino license, decriminalizes pot etc. Sex is beyond any legislative or regulatory efforts by state or church. Banking fees creating peonage, and the marketing of debt like a consumer product during a prolonged suppression of wage increase and loss of buying power by the middle class, is not equatable with loosing up attitudes towards to shady human behavior that is seems part of our biology. Sex, risk taking and banking fees being reined in? Is this some sort of socio-biology argument that you are getting at? Are you saying that we are getting puritanical in our attitudes about lending, harking back to moral stances against usury? Are you missing the world wide credit collapse brought about by permissive let the market regulate itself, the government should not intervene attitude that destroyed trillions in home values, forcing foreclosures and unemployment in the tens of millions we still have not recovered from. Is sex and gambling to be equated with the on going global economic catastrophe of the banking industry unimpeded by ethics, much less than actual laws.
legislative efforts— Fernando08
