The current economic cycle will end one day but new regulatory constraints and the lingering effects of financial-system breakdowns could change credit card issuing for years.

"One thing we know is that we will be a smaller industry, and that's not a bad thing," Kenneth D. Lewis, chairman, CEO and president at Bank of America Corp., said of financial services during recent testimony before the U.S. House of Representatives Committee on Financial Services. "Obviously the rapid growth of our industry in recent years was overdone."

New federal regulations alone, even without the economic crisis, will radically alter the way many issuers operate, industry insiders agree. Starting in July 2010, new rules to federal Unfair and Deceptive Acts or Practices regulations will ban issuers from raising interest rates on existing balances, except in limited situations, including when cardholders make payments at least 30 days late.

They also will change the billing and payment cycle from a minimum of 14 days to 21 days - and require issuers to apply cardholders' payments first to their highest-interest balances, reports Collections & Credit Risk.

Peter Garuccio, spokesperson for the American Bankers Association, says the Federal Reserve Board has indicated "that these new rules are likely to result in increased interest rates and decreased credit for some individuals."


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