the limits and costs of regulation (revisited)

Impressive analysis in an article from the AP's Dave Carpenter (hat tip: C-J where only some of it is available on-line)...

The topic: the costs (and not just the benefits) of the new credit-card law. Hallelujah!

The new credit card law is receiving widespread kudos as a victory for cardholders over the lenders that impose "gotcha" fees and penalties with scant justification and little notice.

Indeed, an industry that has been virtually unregulated will now be reined in in many ways, to customers' benefit....

Still, there are pitfalls to the legislation...and some are likely to hurt consumers....

HIGHER RATES: Issuers are considered certain to bump up annual percentage rates soon to compensate for the fact they can't increase them on new customers for one year after the regulations take effect in late February. Not only are introductory rates likely to rise, APRs on existing accounts may well go up too...

ANNUAL FEES: The free ride is likely to end for many who use their credit cards as a convenience and pay off their balances in full every month....Expect to pay at least $50 to $100 a year.

LOST GRACE PERIODS: Trying to make up for lost revenue, banks are considering charging interest from the date of a purchase instead of allowing a grace period, now typically 20 to 25 days....

OTHER FEES AND PENALTIES: The new regulations put no restrictions on fees for balance transfer, cash advance or late payment. All are likely to rise...

TIGHTER CREDIT: Consumers with lower credit scores will find it harder to persuade strapped card issuers to give them credit because of the new regulations....

SMALLER CARD ISSUERS MAY VANISH: Six mega-companies issue 80 percent of all credit cards: American Express Co., Bank of America Corp., Capital One Financial Corp., Citigroup Inc., JPMorgan Chase & Co. and Discover Financial Services....some of the smaller banks and issuers that make up the other 20 percent are likely to stop issuing cards....