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The Credit C.A.R.D. Act: Opportunities and Challenges for Credit Unions

How will the 2009 C.A.R.D. Act affect credit unions? Author Adam Levitin calls the act “the most significant piece of credit card legislation in a generation” and highlights implications and strategic options for credit unions in this report.

Executive Summary

On May 22, 2009, President Obama signed into law the Credit Card Accountability, Responsibility, and Disclosure Act of 2009 (the “Credit C.A.R.D. Act”), P.L. 111-24, the most significant piece of credit card legislation in a generation. The Credit C.A.R.D. Act mandates major changes in credit card underwriting and the resultant business model. These changes both pose challenges and offer opportunities for credit union card operations in particular.

What is the research about?

This research brief first reviews the major provisions of the Credit C.A.R.D. Act. It then considers how these changes affect card issuers’ underwriting and marketing in general. Next it surveys the relative position of credit unions in the card industry and cards in credit unions’ business, after which it turns to an analysis of how the Credit C.A.R.D. Act is likely to affect credit unions. It concludes with some suggestions of how credit unions can position their card operations to take advantage of the market changes wrought by the act.

What are the credit union implications?

The right strategic place for credit unions is to focus efforts on simplicity and transparency while doubling down on collaborative credit card efforts to improve efficiencies. Doing so will allow credit unions to pick off the current and future malcontents fleeing boorish bank behavior.

Credit card growth will not automatically accrue to credit unions. Large issuers will use their scale and their marketing power to assert their dominance despite the new restrictions. The opportunity for credit unions lies in banding together, cutting complexity, and offering members a clearly transparent option.