ST. PETERSBURG, Fla.-Card issuers and processors continue to race to comply with the numerous provisions of the soon-to-be-effective CARD Act, but already the specter of more legislation and/or new regulations is raising even more concerns.
Steve Salzer, PSCU's chief strategic, compliance and legal officer, said on the credit card side there are two provisions in the CARD Act that have not yet played out. For starters, the Federal Reserve Board still has to issue regulations on the "reasonableness" of fees.
"We are expecting either in this month or March for the Fed to issue these," he said. "There is a real uncertainty in the industry because on top of everything else that has come down in an accelerated timeframe, there is still one more thing."
In addition, Salzer told Credit Union Journal there is a non-specific requirement in the CARD ACT for issuers to examine balances for interest rate reductions if that balance has had a prior interest rate increase. New regulations on when and how an account should get an interest rate decrease, and how much of a decrease, have not yet been determined.
"This is micromanaging the practices issuers use to manage their portfolio," Salzer assessed. "It has gone from 'Let the issuers do what they want as long as they properly disclose it,' to 'We don't care if you disclose it, we are going to tell you what to do.' Issuers are waiting with their fingers crossed to see what the Fed is going to come out with."
All that uncertainty has led to a fair amount of speculation, noted Salzer, including rumors that Congress might impose a rate cap or further regulate card APRs. "The feeling is this is unlikely to happen - that Congress would go that far - but there is concern Congress might go way overboard," he said.
In addition, there remain a number of prior regulations from the Fed to deal with, including a one legislating away "floor" APRs, and changes to Reg Z that are set to go into effect July 1.
"There is a concern the Fed may promulgate additional regulations prior to July 1, with a July 1 effective date, and those regulations will add new Regulation Z disclosure requirements," he said. "The Fed just did that with the CARD Act and floor rates. The fact the Fed would do something that dramatic like that, on Jan. 12 with a Feb. 22 effective date, means there is a continuing concern in the industry with there being new regulations with limited notice to comply."
The CARD Act also addresses gift cards and speculation is additional rules on related fees and disclosures may be forthcoming. There are similar concerns related to debit cards.
Looking at the big picture, Salzer said the real question is what to make of the new regulatory environment. "Will the next 12 to 18 months be just as bad in terms of a pile-on, or will there just be a clean-up of activity; finishing what is already in process? My guess is it will be somewhere in the middle, hopefully closer to the clean-up part of the spectrum."
The regulatory situation "already has gone very far for issuers running their programs," Salzer said. "In a tough economy, there are issuers that were already struggling, and this makes it much tougher. There was talk of cutting back credit available to consumers, which is not the intended result. Even more regulation would make it very difficult to manage a program. It is a shame credit unions are being caught up in regulations because of some banks and monoline card issuers having abusive practices. Credit unions have always had much, much more consumer-friendly card practices, but now they have to deal with these regulations as well."
