What's Wrong With Credit Card Reform?

Will there be changes in the minimum credit score need to get a new credit card?
We’ve already seen that, obviously in an economic downturn, the risks associated with lending go up, which would suggest that standards are tightening a little bit. People with great scores will always be able to get the credit they need. The real impact is going to be on the lower end of the spectrum.

It’s possible that subprime credit cards will go away. It doesn’t have as much to do with [the required reduction in] fees as it does with the business model. The ability to price for credit risk is limited, and an individual credit profile can change significantly over a short period of time.

Under the system we have today, you can take 20 people with a limited credit history, you can offer all of them a credit card with the same interest rate and you know one will have problems. When that one person becomes riskier, you can adjust. But under the [proposed] regulations, they’ll all have to pay a little more from the get-go [to hedge against that risk].

What should consumers expect before legislation takes effect?
Between now and then it’s going to depend on the broader economic forces at work. If things get worse, the risks associated with credit card lending will get higher.