Banks expect to tighten terms on credit cards in response to a new law that aims to protect consumers from sudden rate increases, the Federal Reserve said on Monday.
A quarterly survey by the Fed found that many banks expect to increase rates, reduce credit limits and raise annual fees for prime borrowers, those with sound credit histories, and for nonprime borrowers, those with tarnished credit. Banks also expect to raise minimum credit scores for nonprime borrowers, the Fed said.
Banks have been pushing through rate increases in anticipation of the new rules. Because of that, the House recently approved legislation to speed up the law's effective date and have the provisions take effect immediately, although prospects are dim for Senate passage.
Most of the new credit card provisions are set to take effect Feb. 22.
Many people and businesses are having trouble obtaining loans, which is likely to restrain the economic recovery.
It's a delicate dance for policymakers in Washington. They want banks to boost lending, but no one wants a return to the lax standards that many blame for contributing to the worst financial crisis since the 1930s.
The Fed's survey also found that nearly 26 percent of banks said they tightened standards during the past three months on home mortgages for prime borrowers. That was up slightly from almost 22 percent in the survey released in August but is significantly below the peak of about 75 percent that reported tightening standards for such loans in July 2008.
Email
Facebook
Google
Twitter
Favorites
More
Advertisement
Advertisement