Issues to Consider in Connection with the Reevaluation of Credit Card Lending and Charge-Off Policies


While the full effect of the Emergency Economic Stabilization Act of 2008 on the economy remains to be seen, it is clear that current economic conditions are impacting financial services broadly, including the credit card industry. Recent statistics indicate that the current economic situation has significantly affected credit card debt performance and has triggered an increase in the overall rate of credit card delinquencies and charge offs.

As a result, many credit card lenders have begun to reevaluate their lending and charge-off policies in an attempt to stem, to the extent possible, the economic fallout from deteriorating credit card portfolios. In addition, to assist cardholders who are at risk of default, many credit card lenders are implementing or fine-tuning their consumer workout/reage programs.

Given the potential impact of these actions on both consumers and the institutions themselves, increased regulatory scrutiny of credit card issuer practices in these areas is likely. Moreover, as regulators focus on the possible threat posed by growing credit card delinquencies and charge offs, it is possible that the current legal and regulatory framework associated with these issues will be revisited and revised. Below are examples of current regulations and regulatory guidance that affect these areas of concern.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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