There is no doubt that the credit industry is in very sad shape right now. High delinquency rates coupled with record levels of write offs have resulted in serious financial setbacks for credit card industries. The impending activation of the credit card bill in a few month’s time will also have a negative effect on the credit industry. However, in the end it will be the consumers who are going to get hit hardest, experts say.

Laura Nishikawa, researcher for RiskMetrics, a shareholder advisers group, said that credit card companies are going to abandon their traditional business models because the combination of rising defaults and tighter regulations are stifling their profits. In general, the adviser sees that lending is going to slow down with borrowers borrowing less and lending companies holding back loans.

Recently, Nishikawa authored a report stating that the credit card industry is going to change fundamentally because of the unexpected increase in credit risks and the newly established federal regulations. She also said that the results of the changes will stay with the credit industry far longer than the business cycle currently. According to her, the profits that credit companies used to enjoy are no longer going to happen. The result will be that these companies will curb the availability of credit. Consumers who have risky credit histories are going to see less or even no credit. Even reliable consumers are going to take a hit through higher loan costs and a drying up of benefits and perks.

According to Ben Woolsey of CreditCards.com, the new regulations will greatly limit the ability of credit card companies to earn profit. The companies will not taking that sitting down, however. Originally, the credit industry saw enormous profits off borrowers who would carry balances every month. Now, with that gone, the industry is going to look elsewhere and the most likely target would be borrowers who have been getting a free ride for many years. Thus, borrowers will soon see annual fees and a loss of promotional offers.

The impact of the credit industry’s actions will have a large effect on the economic recovery of the country, said Center for Responsible Lending senior researcher Joshua Frank. According to him, the recovery of the economy will be slowed down largely due to the losses in the credit industry. Credit card companies who are cutting off access to credit are also going to slow down consumer consumption. The drying up of credit will also have a psychological impact on the general consumer population and spending will slow down considerably, even among those who don’t use credit cards a lot.