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New Credit Card Rules Could Help Banks

Management indicated during a fourth-quarter conference call that Citi will lose anywhere from $400 million to $600 million in net pre-tax revenue as a result of the CARD Act. It's unclear whether the government will crack the whip again for Citi's planned credit-card fees, which customers have been informed about via mass mailings.

Capital One had also been using some less-than-savory tactics, until a bank regulator recently took notice. Capital One had been charging some customers an annual fee, despite the fact that they had already closed their accounts years ago. Capital One attributed the post-mortem fees to a system glitch, and agreed to reimburse customers a total of $775,000, as part of an agreement with the Office of the Comptroller of the Currency.

JPMorgan Chase's Jamie Dimon has been a vocal critic of much of the consumer-protection legislation, asserting that it will increase costs for banks while reducing revenue, and not helping consumers all that much. Since banks will continue on their profit-driven mission, the changes will eventually make all consumers pay more, rather than targeting the ones who are bad at managing their money. Dimon has a point, but it's one that has largely fallen on deaf ears.

"The effects of the CARD Act coupled with the overall attitude in Washington regarding consumer protection will likely continue to reduce industry revenues and profits over the next several years," Credit Suisse analyst Moshe Orenbuch said in a recent note to clients.

As a result, JPMorgan has been aggressive in pursuing new customers and expanding banking relationships with existing ones , until there is more clarity on where new fees can acceptably land. The bank estimates it will lose $500 million to $750 million in annual revenue as a result of the CARD Act legislation until then.

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