Pressure from Congress will probably prompt more credit card issuers to adopt practices that would reduce their fee and interest revenue, but the changes would not cause downgrades of credit card-backed securities, Fitch Inc. said.
The Senate Permanent Subcommittee on Investigations has held hearings on credit card practices, particularly on universal default, penalty pricing, and late and over-the-limit fees.
Cynthia Ullrich, a senior analyst at the New York rating company, wrote in a note last week that issuers would adopt new measures to satisfy politicians, which may squeeze excess spread in some U.S. credit card securitizations. But the industry is well protected, she wrote.
"Although implementation will likely reduce gross yields and may pressure excess spread levels in some transactions in the short term," she wrote, "it is unlikely these changes will cause any negative rating actions due to generally stable performance and sufficient enhancement to absorb losses."
Fitch analysts wrote in the note that more issuers are likely to abandon aggressive pricing and penalty fees even if not required by law. They wrote that credit card issuers will probably stop charging over-the-limit fees and eliminate some interest rate increases.
