Banks unhappy with new rules regarding charge cards

New regulations for charge cards on how interest rates and fees can be assessed are working. However, not everybody is happy about it. Lenders aren’t thrilled with the new rules, which mandate greater disclosure to card holders. Guerrilla style fees and rate of interest raises are really decreasing as a result. Due to the lost revenue, B of A and many businesses are losing value from charge card units.

B of A realizes loss from credit card unit

The bank's credit card unit for Bank of America had a financial statement come out about this. Bloomberg reports that this can be changed now. The FIA Card services were worth $20.3 billion less in 2008 than it was in 2009. Bank of America announced this change for late 2009 from $10.4 billion to $20.3 billion. In order to show a greater loss of value than it was believed to be, the company adjusted the previous filings. Because of the prestige of the holder of the asset, the "goodwill" value was lost rather than true money. The "goodwill" is the value of an asset above sector value. The financial institution cited regulatory conditions and “deteriorating credit quality” for FIA Card Services being worth $10 billion less than estimated in 2009.

It was due to the CARD Act

The new regulations such as the CARD Act or Credit card Accountability Responsibility and Disclosure Act, is what is being cited by loan companies like Bank of America as a reason for troubles. Banks are upset that there is less access to advance money for more lending. That means the law is working correctly though. There have been fewer cases of changes in rates of interest and late fees added on to individuals. CNN reports that this is because of the CARD Act.

Outcomes of card law

The CARD Act has been very helpful. The outcomes have been good. Interest rates have been raised on 2 percent of card holders since the law changed compared to before the CARD Act which was about 15 percent. Now only $427 million have been paid in late fees as of Nov 2010 after the Act was initiated. Before it started in January 2010, the amount was $901 million. That means corporations from Scottsdale to Birmingham and all over the U.S. that look to seemingly surreptitious practices for revenue are having a harder time, which is what the CARD Act is intended to do.

Articles cited

Bloomberg

bloomberg.com/news/2011-02-21/bofa-almost-doubles-credit-card-unit-writedown-to-20-3-billion.html

CNN

money.cnn.com/2011/02/22/news/economy/credit_card_act/?cnn=yes