Credit Card Rules Cut Bank Fees by $5 Billion

New credit card and overdraft restrictions will save U.S. consumers from being charged at least $5 billion in fees this year alone at the largest U.S. retail banks and credit card companies, a USA TODAY analysis reveals.

The analysis -- based on institutions' own estimates -- comes during a year when new rules are kicking in to address unfair credit card rate increases and steep bank overdraft fees. It highlights the sizable dent these rules will have on an industry blamed for pushing consumers deeper into distress during the recession.

In recent years, banks made it easier for consumers to overdraw their bank accounts and raised credit card fees and rates. As consumer outcry swelled in the recession, Congress passed a credit card law and the Federal Reserve issued a regulation to crack down on banks' aggressive overdraft policies on debit cards.

Lawmakers hope the restrictions will mean much-needed savings for consumers, boosting spending and the economy. Indeed, new data show the measures are their "own little stimulus for the economy, keeping billions in the pockets of consumers rather than in profits gained from deceptive practices," says Rep. Carolyn Maloney, D-N.Y., co-author of card reform signed into law last year.

USA TODAY's analysis relies on institutions' projections of what they will give up under the new rules, gathering data from the 10 largest retail depository institutions and the 10 largest holders of credit card receivables, as tracked by SNL Financial.

Of the 10 institutions with the largest amount of credit card receivables, seven gave estimates about the credit card law's impact. In all, the issuers -- Citigroup, Bank of America, JPMorgan Chase, Wells Fargo, U.S. Bancorp, HSBC North America and Barclays Group US -- will forgo at least $2.5 billion to $3.1 billion in fees just in 2010. Also, seven of the top 10 depositary institutions expect to take a combined $2.4 to $2.6 billion hit under the new overdraft rules and banks' voluntary policy changes.

R.K. Hammer Investment Bankers predicts that institutions will give up at least $9.9 billion in revenue a year due to the credit card law. Moebs Services estimates that the industry's overdraft revenue will shrink by $1.9 billion, to $35.2 billion this year. While some institutions are moving away from overdraft coverage, others are boosting fee income with new programs, Moebs says.

Scott Talbott, a senior vice president at the Financial Services Roundtable, warns that the total cost of the credit card and overdraft regulations will be even higher than bank estimates, which "don't take into account the loss of services and credit that would be available."