Delaware Getting Hit Hard By Changes In The Credit Industry

Since the economic crisis started, the credit industry has been in a state of flux. Early this year, major credit card companies faced bankruptcy as credit card holders started defaulting on their credit card debt payments, many of which resulted in massive write offs among credit card companies. Had it not been for a massive bailout made by the government, using tax funds from American consumers, many large credit card companies would have collapsed.

The passing of the new Credit CARD Act hasn’t done any good for the credit card industry as well. The Credit CARD Act, a set of legislations aimed at stopping the predatory practices of credit card companies, aimed to completely overhaul credit card practices, threatening many of the major sources of profits of credit card companies such as interests and fees. As a result of these developments, credit card companies have become stricter with credit. They have also raised their interest rates and fees, added new fees, cut available credit and done just about everything they could do to maximize profits before the Credit CARD Act puts a stop to these practices.

The abusive practices of credit card companies are not going unnoticed. Legislators are now pushing for an earlier activation of the Credit CARD Act so as to give credit card holders protection that much sooner. Yet, more damaging for credit card companies is the continuing loss of confidence of credit card holders, many of whom are moving away from credit cards altogether.

As the credit industry continues to fluctuate, the state of Delaware has become an unwilling recipient of unintended consequences. During the early 1980s, Delaware, a comparatively small state, found itself becoming the headquarters of major credit card companies, making Delaware a virtual center for the credit card industry.

Credit card companies preferred to establish their headquarters in Delaware primarily because they found out that they could charge unlimited interest rates to any of their customers all over the nation as long as they maintained their base in the state of Delaware. This is the main reason why major credit card companies such as JP Morgan Chase, HSBC and Bank of America maintain their credit card operation headquarter in Delaware.

Now, the small state is finding its economy taking a painful hit as credit card companies reevaluate their credit card businesses. According to a report from the Wilmington News-Journal, “After peaking at about 18,000 workers in 1999-2000, the Delaware card industry has been contracting. From the beginning of 2007 until today, employment dropped 10 percent to 14,500, and wages were off 25 percent”.