The new law on credit cards

The new law on credit cards
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The U.S. Congress is seriously considering that it should establish new management service rates, which are to be fees that sellers must pay to those banks that issue credit cards. In the case of this solution it will not have the best impact on banks that will receive such remuneration, transmits Reuters. Experts say that as a result of that action the banks may try to separate the effects of such solutions to credit issuers, which are Visa and MasterCard. And as a result, these companies, which are the world’s largest payment systems, may suffer from much lower incomes and falling prices for their shares.

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“I think that in the long run, this problem may actually become relevant. However, it can affect the shares of Visa and MasterCard even now” – said the expert Citigroup Donald Fandetti. Concerns about this law have already made their contribution in a 10 per cent decline in the shares of Visa and a 5 per cent decline in the securities of MasterCard for the last month. Their shares are very likely to fall in price further, analysts believe. “The Bill will pull down the stocks at least as long as we do not have any clarity,” – considers the representative of Cowen & Co company Moshe Katri.
It is also worth noting that the bills on the service charge that are now under discussion may be a supplement to the recent law, which approves limiting fees and interest rates on credit cards. The new bill will give wholesalers and retailers the opportunity to discuss service charges with banks. This bill came as a result of longstanding complaints from the owners of shops that banks operate in a conspiracy, set the fee structure, and do not allow the sellers to negotiate with Visa and MasterCard.

Service charges have increased by 14 per cent to about 48 billion U.S. dollars, accounting for approximately 1.75 per cent of the total amount of purchases just on the basis of the last year. In their turn, Visa and MasterCard have said that merchants have an opportunity to discuss the reduction of charges with them. In doing so, companies that issue credit cards add that they will not be affected by the new law because they are not engaged in levying service charges.

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“It is very unlikely that the Congress will regulate the service fees by law or will set prices”, – says the president of Visa of North America, William Shidi. In his turn, the President of MasterCard in the U.S. market Makvilton Chris wonders whether the American government is planning to enter the game in order to control the price in the free market. “In the end, this is a price control, and it is not very good”, – adds K. Makvilton.

It should be recalled that in late May, U.S. President Barack Obama signed a law protecting the rights of holders of credit cards. The new law restricted the right of the card issuers to increase interest rates and commissions, and ordered them to inform clients about changes in the terms of the contract in advance. The official name of the document is The act of accountability, responsibility and information disclosure in the industry of credit cards.