Several regulatory agencies, including the office of Thrift Supervision, are expected to issue their own regulations to cover narrower segments of the banking industry. Edward Yingling, president of the American Bankers Association has said in a statement that the Fed's proposals represent "an unprecedented regulatory intrusion into marketplace pricing and product offerings." He said the measures would "result in less competition, higher consumer prices, fewer consumer choices and reduced consumer access to credit cards." In other words, if the industry has to follow the proposed rules, they will offer fewer credit cards to people!
The proposed regulations in addition to other things, would require card issuers to mail out statements at least 21 days before a payment's due date and prohibit issuers from applying partial payments only to balances with the lowest interest rates thus leaving costlier, higher rate balances intact.
The credit card industry is unlikely to be able to carry out its threat. Last year it sent out 5 billion solicitations to U.S. households. How far can it scale back? In fact if banks decided to stop issuing cards to people with poor credit histories it might do a lot of good. Americans today carry $951.7 billion in revolving credit card debt, up 5.9% from a year ago. The average credit card debt is about $8,000. Yingling considers the Fed's proposals to be "particularly perplexing" because they would result in "a reduction in credit availability at the very time the Fed is working to increase credit in the marketplace."
This is only an idle threat. The banks make good money in credit card penalty fees. Last year they collected a record $18.1 billion on this account. They aren't going to do anything that hurts their interests. The sooner the regulations are in place, the better it will be for everybody. The banks have had it their way for far too long.