Banks upset with new laws on credit cards

New regulations for charge cards on how interest rates and fees could be assessed are working. Lenders and card companies are not terribly happy, as new mandates force them to be more forthright with their fees and charges to consumers. The laws are working, and charge card units at major loan businesses for instance Bank of America are losing money as sly interest hikes and fees are not allowed anymore.

Noticing Bank of America credit card losses

The bank's charge card unit for B of A had a financial statement come out over it. Bloomberg reports that this can be changed now. Bank of America announced that it was adjusting a write down of FIA Card services, its charge card unit, for late 2009 from $10.4 billion to $20.3 billion, meaning the credit card unit is worth $20.3 billion less than it was in 2008. The filings were adjusted by the company. This shows the loss was actually much larger than initially reported. Due to the prestige of the holder of the asset, the "goodwill" value was lost instead of true cash. The "goodwill" is the value of an asset above industry value. The financial institution cited regulatory conditions and “deteriorating credit quality” for FIA Card Services being worth $10 billion less than estimated in 2009.

Losses were because of CARD Act

Several loan providers for charge cards are having problems like Bank of America. The new regulations are to blame including the Credit card Accountability Responsibility and Disclosure Act, or the CARD Act. It is posited the act means less access to advance money for further lending, though this means the law is working. There have been fewer cases of changes in interest rates and late fees added on to people. CNN reports that this is because of the CARD Act.

New card law a smashing success

The CARD Act has yielded some great outcomes. Since the law was passed, studies show that about 2 percent of card holders had rates of interest elevated, compared to 15 percent before the CARD Act was passed. Late fees, which accounted for $901 million in instant cash for card issuers in January 2010 — before the Act took impact in Feb. 2010 — had dropped to $427 million by Nov 2010. 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.

Information from

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