Citigroup Inc. (C) is instituting annual fees on some current credit-card accounts in an attempt to offset strict new legislation that could dent its profits.

The move comes on the heels of several warnings from the banking industry, which has said that issuers would be forced to rewrite the playbook on plastic because new credit-card laws would take a bite out of their income. These laws include new limits on interest-rate increases on existing balances and greater disclosures.

Typically, annual fees are associated only with cards that offer generous rewards programs. In recent years, few issuers have risked losing market share by charging annual fees across the board.

Now, Citigroup's attempt to charge annual fees - perhaps the first time a large card lender has used such fees in response to the legislation - will be watched closely by competitors. Card lenders are seeking ways not only to offset the effect of the legislation, but also to cope with growing losses stemming from souring credit-card loans. Card issuers have been raising interest rates and fees, tweaking rewards programs, reducing credit lines and closing accounts.

"We have adjusted pricing and card terms for some customers as part of our regular account reviews," said Samuel Wang, a Citigroup spokesman. "These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit. As part of this change in terms, a small number of Citi customers may be notified of an annual fee."

The fee increase was reported earlier by blogs such as Bargaineering.com, and American Banker.

In one instance, a Citi cardholder was informed, in a mailer, of a $30 annual fee. This fee may be waived if at least $2,400 in spending is racked up on the card in a year.

Citigroup is experimenting with a range of annual fees, some in excess of $30. Cardholders notified of these annual fees have two months to opt out, paying off their balances under current rates and terms over the rest of their contract.

Peter Garuccio, a spokesman at the American Bankers Association, an industry trade group, said, "Annual fees are one way that card issuers can reconfigure their card portfolios and reprice their products" following the credit-card legislation.

The new legislation, the bulk of which will be implemented in February 2010, aims to limit fluctuating interest rates and fees, and arm consumers with more information on their debts.

A Bank of America Corp. (BAC) spokeswoman said the company hadn't added any annual fees to its cards since May, when the legislation was passed.

"We have no plans to charge an annual fee on our cards," said a spokesman at Discover Financial Services (DFS).

A spokeswoman at American Express Co. (AXP), which already charges annual fees on many of its credit and charge cards, said the company hasn't raised these fees or imposed them on its fee-less cards. She declined to comment on AmEx's future plans for annual card fees.

Capital One Financial Corp. (COF) "has not made any adjustments to annual fees this year," a spokeswoman said. "As for future plans, we are still assessing the new regulations and developing strategies to address them."

Chase, a unit of JPMorgan Chase & Co. (JPM), declined to comment on its future plans but said most of its cards don't have an annual fee. It charges fees on some of its cards, for instance, its travel cards that come with premium rewards.

-By Aparajita Saha-Bubna, Dow Jones Newswires; 617-654-6729; aparajita.saha-bubna@dowjones.com