Are banks benefitting from CARD Act they lobbied against?

July 27th, 2012 § 4 comments

In a shocking of turn events the dire warnings of “the end of plastic”, trumpeted by the credit card lobby before passage of the CARD act, did not come to pass.

Card issuers have returned quite robustly to profitability since the credit card act went into effect. None of the predicted consequences ended up coming to fruition. They’re really much better off now than they were before.


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§ 4 Responses to Are banks benefitting from CARD Act they lobbied against?"

  • Alfred Morgan says:

    I don’t buy any of this. Where is proof that card issuers are “better off”. Also who ever predicted the end of plastic was being unrealistic and overly dramatic. Did they really expect the card issuers to throw their hands up and quit? Never. They simply adjust and figured out a new way to make profit. One thing I have noticed is that cards are now selling my purchase information for advertising purposes.
    Citi group (C:NYSE) 3 years ago, plummeted hasn’t recovered.
    Royal Bank of Scotland Group (RBS:NYSE) 3 years ago plummeted and hasn’t recovered.
    JP Morgan Chase (JPM:NYSE) plummeted, almost recovered.
    I don’t buy the “better off” statement one bit.

    • Thomas Paine says:

      The reasons those banks are in dire straights has nothing to do with their credit card business and everything to do with the risks they took before the financial crisis hit. JP Morgan didn’t take the same risks though of course the entire financial industry took a beating on the stock market.

      I don’t have proof but the fact that Ben Woolsey, director of consumer research at creditcard.com, says “Card issuers have returned quite robustly to profitability since the credit card act went into effect. None of the predicted consequences ended up coming to fruition. They’re really much better off now than they were before.” means a lot.

  • Alfred Morgan says:

    Headline: Government regulations that actually managed companies better than they could. Ha! Give me a break!

    • Thomas Paine says:

      No. Headline: Government regulation looks to make systemic improvement and succeeds.

      This is a, albeit rare, case where government regulation has done what is best for the market as a whole rather than looking at the bottom line of an individual company. It’s the focus on quarterly profits and y/y growth that, at times, hinder the market as a whole.

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