The Credit Card Act of 2009: Its Financial Impact on the Retail Industry

Abstract

This study analyzes the House passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit Card Act) on the retail industry. Furthermore, this study evaluates the financial impact on those retailers that profit from both: (i) the sale of merchandise and (ii) the financing of the sale through in-house credit card (IHCC) programs. An event study methodology is used to isolate the financial impact on the retail industry by examining changes in market value of equity (MVE). Our results support that retailers with IHCC programs were negatively impacted as two-thirds of these retailers experienced stock prices decline when the House passed the Credit Card Act. Additionally, 78 percent of the large retailers suffered losses and these large retailers, on average, suffered a stock price decline of almost 3.5% which equates to a decline in MVE of $500 million.