Creditnet News Story
New legislation presents profitability challenge to credit card issuers
Thursday, November 12, 2009
By Thomas Astery
High unemployment rates will also make profitability difficult.
In news that could affect credit card offers, a ratings agency reported that lenders could have a harder time being profitable in the near future.
Fitch Ratings also noted that, in the long-term, the ability of credit card companies to make profits will depend on whether they can adapt to new rules put forward by the Credit Card Accountability, Responsibility and Disclosure Act.
Stipulations of the act make it more difficult for companies that present credit card offers to change interest rates.
"The inability to re-price existing balances will necessitate higher rates for all cardholders, credit availability will decline, with tighter underwriting criteria and reduced credit lines, and competition in the prime market is likely to intensify," the report from Fitch stated.
Furthermore, an increasing number of bankruptcies and delinquencies will make things more difficult for credit card issuers as more consumers find it hard to pay off their debts.
Rising unemployment will also add to those difficulties. Recently, the unemployment rate jumped from 9.8 to 10.2 percent in October, with many analysts predicting it will remain above 10 percent for much of 2010.
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