Credit Card Issuers Tighten Standards

"The entire credit environment has taken a turn for the worse, and the entire industry is feeling the impact," Chenault said.

Chase Card Services(JPM Quote - Cramer on JPM - Stock Picks) has taken steps over the past year, such as raising credit-score cutoffs when issuing new cards. Meanwhile, Carter Franke, a senior vice president at Chase's parent JPMorgan Chase, warned a House committee on March 13 that "prudence would seem to dictate extreme caution with legislation that has the potential to further restrict consumers' access to credit."

Franke was discussing a bill, HR 5244, which proposes the restriction of credit card industry practices such as arbitrary rate hikes, exorbitant late charges and surprise changes in terms of agreement.

Industry players are "threatening that they'll cut off access to credit," says Linda Sherry, director of national priorities at the nonprofit Consumer Action. She adds that stricter credit standards don't necessarily have to hurt the consumer. "I don't think they should extend credit to those who can't repay it."

Rafael Ferrer, a 34-year-old business planner in Davie, Fla., says the rates on some of his credit cards have gone up in recent months even though his credit score remains above 700. When he called the London-based financial services firm HSBC(HBC Quote - Cramer on HBC - Stock Picks) in the fall to ask why, one of the people who discussed the matter with him blamed it on the market conditions. "We got all sorts of excuses, but nothing solid," Ferrer says. "You find yourself between a rock and a hard place."

Cindy Savio, a spokeswoman at HSBC, says she can't comment specifically on a client, citing privacy concerns.

"HSBC is committed to providing all of our customers with products and services to meet their needs. Our agents are always available to help our customers address their concerns regarding their account," Savio says.

Ferrer says that HSBC contacted him recently, and finally agreed to lower his rate from 14% to 10%.

How long will credit card companies keep tightening their standards? Michael Kon, an analyst at the Chicago-based investment research firm Morningstar, thinks that as soon as credit card lenders can better forecast what will happen to the U.S. economy in the months ahead, they'll begin to feel more comfortable extending credit again.

"Tightening will continue as long as the future is uncertain," Kon says. "Nobody knows exactly how the real estate market will shake out, so at this point credit card companies are just being careful."

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