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The Credit Card Accountability, Responsibility and Disclosure Act President Obama signed into law last month will force the credit card industry to go back to the way it did business a decade ago, David Nelms, chairman and CEO of Discover Financial Services, told analysts yesterday during a conference call announcing second-quarter earnings. A key provision of the act, which goes into effect next year, restricts card issuers' ability to raise borrowers' interest rates based on risky behavior. This provision will likely put an end to the constant customer turnover among large issuers touting 0% and low-rate balance-transfer offers, Nelms said, noting there were "winners and losers" on risk-based pricing emerged over the last decade. "But as I think about it, a lot of (the effect of new card regulations) just moves us back to how the industry used to work," he says. "It was less than 10 years ago that no one had delinquency-based reporting triggers in their disclosures or in their agreements at all. ... To some degree we will return to how we used to do things a bit more, which is setting an adequate price up front and then sticking with that over time." Discover plans to cut its own low-rate balance-transfer offers by 75% during the second half of this year (CardLine, 6/18). Instead of luring customers with promotional interest rates, Discover will offer mostly variable-rate cards tied to the prime interest rate, and the company will tout its cash-back rewards in its marketing, Nelms said. He expects some reduction in credit availability and "some modest increase" in average card pricing. Asked whether Congress might pass a bill this year restricting interchange, Nelms said he is not sure a need exists for interchange reform and was "leery of anything resembling price controls."

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