Discover Financial Services expects the new credit card industry regulations to lead to higher interest rates, more fees and fewer loans industrywide.
"There are many consumers that actually will not benefit," David Nelms, the Riverwoods, Ill., credit card company's chief executive, said in an interview last week after Discover released its second-quarter results. "Some of the unintended consequences are going to be difficult for customers."
President Obama on May 22 signed into law limits on credit card rate increases and penalty fees, as well as curbs on marketing.
Discover will not be hurt as much as some of its competitors, because it did not engage in some of the disputed practices, Nelms said. Still, the new rules will drive up average annual percentage rates on card loans and consumers may find it harder to get credit, he said.
"Most consumers have benefited enormously from risk-based pricing," Nelms said. "Those that kept their credit in good standing have had historically low credit card rates over the last 10 years. I see that unwinding."
Nelms told analysts on a conference call that Discover plans to pull back "dramatically" on offers to transfer balances from competing cards at discounted rates, and that the discounts may not last longer than six months.
He also said that Discover will keep its cash-back rewards program and that it has no plans to impose an annual fee.