American Express to ‘suffer less pain’ under new laws, others to adapt
American Express Co. believes it is ahead of the curve compared to its major rival companies in adjusting to the new credit card laws that will take effect in February because it depends less on interest paid by customers.
American Express received only 20 percent of its revenue from charging interest rates, according to Chief Executive Kenneth Chenault. Rivals like JPMorgan Chase, Citigroup and Bank of America made the bulk of their credit card revenue from that single item.
"We will suffer less pain," Chenault said during a conference on Wednesday.
In addition, Chenault said American Express was planning to aggressively promote its charge cards whose balance must be paid in full at the end of the month, as debt-burdened American consumers try to use their credit cards less.
The new law will restrict the ability of credit card issuers to raise interest rates on cardholders' existing balances, to charge certain fees, and to impose penalties on consumers that the government deemed unreasonable.
While Capital One’s chief financial officer admitted the laws will have a profound effect on the industry as a whole, credit companies will adjust.
Capital One CFO Gary Perlin didn't give specifics about how the law will affect his company’s costs or revenue, but he said that there will be a "reinvention" of pricing and fee structures industrywide.
Some areas that will see major changes include the ability for a lender to adjust or reprice outstanding debt, and how much they can charge consumers in various fees, Perlin said.
