President Obama has already made transparency a key theme for his administration, and it's clear he expects the same from leading companies in the credit card industry. Sitting at a long table surrounded by key executives from corporations such as American Express, Bank of America, Citigroup, and Capital One, Obama stated, "No more fine print, no more confusing terms and conditions. We want clarity and transparency from here on out" (The Washington Times). Has the moment finally come?
Surprise rate increases and skyrocketing fees have cash-strapped consumers in a rage, and I believe the Obama administration sees this as a huge opportunity not only to make some lasting changes in the industry, but also to score a big political win with the American people. All of this is occurring at a time when Congress is currently reviewing two major pieces of legislation - the Credit Cardholder's Bill of Rights and the Credit Card Accountability, Responsibility and Disclosure Act. Both pieces of legislation strengthen consumer protections addressed in the Fed's rule changes earlier this year and stress earlier adoption, which is currently set to take effect in July 2010.
Of course, what can the credit card executives do other than sit at the table, listen intently, nod their heads, and say they will attempt to address the issues? We're talking about the loss of "high-margin" money for them, but in the big scheme of things some analysts predict it will only "cost" the industry an estimated $12 billion in annual revenue to implement the President's proposed plan. That may be a low estimate, but even if it were $20 billion for the entire industry, it would still be a drop in the bucket when you consider BOA alone pulls in about $30 billion in revenue each quarter.
Yes, they will surely fight to hold onto that high-margin revenue as much as possible. And yes, they will likely continue to complain about how the reform will do serious damage to the industry and the availability of consumer credit. However, I still doubt it will do much damage at all to the industry as a whole. Credit isn't going anywhere, and I'm convinced the big banks will quickly find other ways to make their money.
