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Federal Reserve Board Chairman Bernanke Raises Implementation Concerns With Legislation To Accelerate The CARD Act

WASHINGTON, October 21, 2009 -

- Federal Reserve Board Chairman Ben Bernanke noted that legislation to accelerate the effective date of the Credit Card Accountability Responsibility and Disclosure (CARD) Act would have a detrimental impact on small credit card issuers, raising concerns that the legislation could hurt our economy by further reducing consumer choice and access to credit.

In response to a letter from Financial Services Committee Ranking Member Spencer Bachus regarding the impact of H.R. 3639, which the Financial Services Committee is scheduled to consider this week, Bernanke wrote: 

"Creditors must make extensive changes to their systems and business models in order to comply with the Credit CARD Act. For example, because the Credit CARD Act limits the circumstances in which a creditor can increase interest rates based on an increased risk of loss, creditors must develop new methods of accounting for risk.  Creditors must also revise underwriting systems for all new and existing credit card accounts, develop new systems for calculating interest charges when balances are partially paid during a grace period, create procedures for submitting credit card agreements for publication on the Board's website, and design new disclosures regarding the consequences of making minimum payments."

"Board staff understands that many small institutions (such as community banks and credit unions) rely heavily on third-party vendors to adjust their systems and that these vendors are currently overwhelmed by the demand from all of the institutions they services."

"Board staff also notes that creditors are not the only entities that must comply with the Credit CARD Act. In particular, the Act requires institutions of higher education to disclose agreements with credit card issuers regarding the marketing of credit cards to student.  Many of these institutions may be unaware of the new requirement and will require some time to put procedures in place to make these agreements available."

Click here to view a copy of the letters.

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