The Associated Press reports that credit card giant JPMorgan Chase & Co expects that its credit card income will drop by as much as $750 million because of the new credit laws that went into place recently. As a result of this loss of income, the company says it needs to cut off a large number of consumers from their credit.



This information was obtained from an annual letter to the shareholders that was released on Wednesday by Jamie Dimon who is CEO of the company. He expects a $500 million to $750 million loss from the credit card reforms that were put into place by the Credit CARD Act of 2009, which began going into effect in February.


The new credit card law places bans on credit card companies from changing interest rates on existing balances on credit cards. It also places bans on charging over the limit fees without getting customer permission for doing so.


In the letter, Dimon writes that he believes the these bans on changing interest rates were completely appropriate, but noted that the company eliminated some of the practices even before the new law was put into place. This includes the universal default which occurs when interest rates rise when a payment on an unrelated bill was made late by the consumer.


Nevertheless, the prohibition on existing balance rate hikes required the response. The company has cut credit limits to numerous consumers and it has canceled credit cards for those who have not used cards for an extended amount of time.


In addition to this, the company cut the number of promotional offers it often provided including low introductory rate periods and rate balance transfer discounts. By doing this, it reduce outstanding balances by an estimated $20 billion.


The company says it will no longer offer credit cards to 15 percent of those current customers. The reason for doing this is because the company determined that the consumers were too risky in light of the new regulations that would limit increases in interest rates should the client’s risk profile change.


However, within his letter to shareholders, Dimon states that in many ways, the credit card industry will only grow if there are innovative options offered instead. For example, the company’s Sapphire credit card is now available to those who are considered affluent consumers.


Another option is the Ultimate Rewards program that is being offered by the company. Blueprint is an online program for car customers to get better control over their spending and borrowing habits.

The company has seen significant charge off rates and the amount of debt that the company had to write off in 2009 was at all time highs. The company saw a net loss of $2.2 billion in 2009. It still has 145 million cards in circulation currently with $163.4 billion in outstanding balances on those lines of credit.


Consumers will want to learn about new Chase offers and will want to consider selecting Chase credit lines that better fit their lifestyle to ensure they can maintain credit or consumers will need to turn to other agencies for additional help.


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