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Senate passes credit-card crackdown bill which promises to curb sudden rate hikes and hidden...

Senate passes credit-card crackdown bill which promises to curb sudden rate hikes and hidden fees. Largely anticipated, but credit-card issuers are still looking weak: C +4.1%. BAC -0.5%. JPM -1.9%. AXP -3.2%. DFS -3.5%. COF -4.1%. MA -2.4%. V -2.4%.
Comments (5)
  • Credit card companies were legalized loan sharks. Finally, the government is stepping in.
    19 May 2009, 02:16 PM Reply Like
  • Citi's number seems wrong. C is up 4.6% for now.
    19 May 2009, 02:17 PM Reply Like
  • Actually, Citi is up 5% - And only God knows why.
    19 May 2009, 02:17 PM Reply Like
  • Thanks, fixed the error on C.
    19 May 2009, 02:20 PM Reply Like
  • Watch out for expansion of regulations allowing retailers to give discounts for cash / alternatives to major brands (V / MA), and to choose which type of V / MA credit cards to accept (to reduce interchange fees, thus passing on the savings to consumers).

     

    V / MA interchange model made a lot of sense in the great consumer boom starting 1982, characterized by a period of great prosperity and somewhat irrational consumer spending.

     

    The "new normal" (as PIMCO calls it) will be an environment where every penny counts, and consumers are shifting towards the lowest cost retailers that offers them the most value.

     

    As retailer margins get further compressed, and with inventory and other cost controls fully implemented, the next big cost saver is to bring down cost of accepting payment cards (roughly 50% of retailers' margin).

     

    If the Big 2 Duopoly (V / MA) are not willing to reduce costs, then Obama / Congress will force them to. We are already seeing this in every major sector Obama has gotten involved (e.g., Health Care companies recently "voluntarily" agreed to bring down costs).

     

    Watch for V / MA business model to be challenged in the not two distant future!!
    19 May 2009, 02:43 PM Reply Like
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