The US Credit Card Accountability,
Responsibility and Disclosure (CARD) Act, one of the most
restrictive pieces of card-related reform in recent years, came
into effect on 22 February, with President Barack Obama hailing it
as helping to shift the balance of power back to consumers.

The CARD Act was signed into law by Obama in
May 2009, and its main components include protecting credit
cardholders from certain fee and rate increases. The new rules
restrict credit card issuers from raising rates on late payments
from cardholders and prevent them from charging over-limit fees
unless cardholders have previously given permission to authorise
transactions that would take them over their credit limit.

According to the US government, US consumers
pay around $15 billion in penalty fees every year, and the CARD Act
has been carried into law on a wave of pro-consumer pressure amid
anger over industry practices related to card fees and charges. But
the industry, already reeling from credit-related losses amid the
global economic upheaval of the past two years, says that the new
rules will hurt profit margins even more, and make accessing credit
more expensive for consumers.

In late 2009, US issuers JPMorgan Chase warned
that the CARD Act could result in it losing as much as $750
million, while Citigroup said that revenue lost from its US
business could amount to between $400 million and $600 million. And
according to US payment consulting specialist RK Hammer, the CARD
Act could cost the industry as much as $5.5 billion in lost revenue
in 2010 and more than $50 billion by 2015.

Wave of pro-consumer pressure

And pro-consumer pressure continues
to mount. US Treasury Secretary Timothy Geithner is pushing ahead
with plans to establish a single independent consumer financial
protection agency which would considerably embolden consumers when
making complaints about banking and card-related fees and

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Democratic Representative Barney Frank, chair
of the Financial Services Committee, is a proponent of the consumer
financial protection agency, claiming that its existence would have
eased the CARD Act’s passage into law.

Barack ObamaIn a statement, he said: “It was unfortunately the
case that some banks tried to game the system after we passed the
bill into law, but their actions provide further evidence of our
need for a consumer financial protection agency. While the House of
Representatives did pass a bill to speed up the implementation date
of the CARD Act, there was an inevitable delay in the legislative
process and Republican objections in the Senate blocked the bill.
Had the consumer financial protection agency been in existence we
could have moved right away to block the banks’ egregious

However, some card companies are using the
introduction of the CARD Act in a proactive way to engage with
their customers and position themselves as more

On the day the CARD Act came into effect,
American Express and Discover published online guides to the
reforms in order to educate customers about the implications. The
online guides include articles and videos to help customers
understand how the reforms will affect their cards.

“We’ve always strived to treat our cardmembers
fairly and with respect. In fact, many of the new reforms don’t
affect how we do business – we believe this highlights the
straightforward way we’ve done business since launching the first
charge card more than 50 years ago,” said American Express on its

Carlos Minetti, executive vice-president of
cardmember services and consumer banking at Discover, said: “Over
the years, we’ve listened to our card members and know that they
want ‘straight talk’ from their credit card company and our goal is
to provide that to them. These online resources will help them
better understand credit, while empowering them to achieve brighter
financial futures.”