With tougher regulations set to be implemented in February of next year, the credit industry is gearing up for a tough road ahead. The new law will set tougher standards for card issuers and banks in a bid to protect American consumers.
Lawmakers and advocates have been calling for the creation of a legislation that will curtail the freedom of financial institutions to impose what they say are "outrageous" rates and fees.
The law is also set to pit merchants and business owners with banks and creditors. Experts say that the credit industry is a complex maze of credit providers, large financial institutions, and local owners of business establishments.
Already, financial institutions are increasing other fees and charges to make up for their predicted income loss because of the new law. In recent months, banks have raised some cards' APRs and transfer charges, among others. Analysts say that because of the highly restrictive regulations that will be set in place, card companies are looking for other legal means to milk more money out of cardholders across the nation.
As a result of the sudden increase in fees for both individual cardholders and merchants, business owners are gearing up for a potentially messy fight with large banks on Capitol Hill.
Even merchants and small enterprises are fighting back against years of what they say is oppression by large banks and card companies. Storeowners and managers say that the credit industry earns an estimate $40 to $50 billion each year from interchange fees. These particular fees are charged on every transaction that makes use of plastic.
With the federal government bent on implementing the new legislation next year, merchants are mounting a new offensive to get rid of excessive interest and fees issued by banks. Recent clamor for consumer protection has given small-time business owners even more courage to pursue their own agenda and demand lower interchange fees from banks and card companies.
Purchases using credit cards can mean interchange fees of 2 to 3 percent. This amount is forwarded to payment networks and banks. Business owners say that in the long run, large banks and card companies are set to earn billions more if the government fails to regulate these fees.
Financial institutions, on the other hand, are gearing up for a tough battle in Washington D.C. Industry analysts say that banks and card issuers are taking this issue seriously amidst growing losses which amount to some $82 billion this year.