Jeffries & Company Issues Opinion On "Truth in Lending Act"

Jeffries & Company analysts Richard B. Shane Jr., Jonathan M. Philpot and Roman Leal wrote an opinion on the "Truth in Lending Act".

They said that the proposal balances protecting consumers with credit card issuer's profitability.

They were initially concerned that because of the current economic environment the act might favor consumers in a way that would lower the incentive and ability of credit card issuers like American Express Company (NYSE: AXP), Citigroup Inc. (NYSE: C) and Bank of America Corporation (NYSE: BAC) to lend but it hasn't been the case.

The Jeffries & Company analysts wrote that, "while the framework is unfinished, the building is now taking shape. It is clear that the FRB understands the needs of card issuers to price for risk and remain profitable while still providing consumer protection. Specifically, the document mentions penalty fees ranging from $20 to $40 (consistent with current industry practices). While we do not view this as endorsement of the rates, we believe that even the low-end of that range would support a viable (though less profitable) card industry. What is clear, is that the FRB will ensure that consumers are getting what they pay for. Fees that exceed actual benefits will be prohibited (i.e. issuers cannot impose $20 fees on $5 over-limit transactions)."