Some of the major reforms from the Credit CARD Act of 2009 went into effect in February and banks are beginning to feel pinched from the legislation. JPMorgan Chase (NYSE: JPM) said that the reforms would cut $750 million from their bottom line and Bank of America (NYSE: BAC) said that the reforms would cost it $800 million, a total of $1.55 billion between the two banks.
JPMorgan Chase CEO Jamie Dimon discussed the Credit CARD Act in his annual letter to shareholders which was released on Wednesday. In his letter, he discussed how JP Morgan Chase cut consumer access to credit and closed credit card accounts after the legislation went into effect. He also stated that the rules stemming from the legislation would cost JPMorgan Chase between $500 and $750 million.
Despite the losses, “we believe that many, but not all, of the changes made were completely appropriate,” Dimon said in his annual letter to shareholders.
Dimon also commented that enacting the legislation during the middle of a recession reduced access to consumer credit for some individuals. JPMorgan Chase said that the bank will no longer offer credit cards to 15% of its customers because they pose too high of a risk in the new regulatory environment. As a result, the company has cut credit lines, cancelled unused credit cards and reduced their offers for lower introductory rates and balance transfers.
Separately, Bank of America said that the new legislation would cost them $800 million in lost revenue. The losses will primarily stem from being limited the fees that the bank can charge as well as being unable to change customer’s interest rates based on available market rates for existing balances.
