Monday, February 22, 2010

3X Inc. in Charge-Off Rate for Credit Cards Since '06 to Record High; Don't Issuers Deserve Protection?

The Credit Card Act of 2009 provides a lot of protection for cardholders:

Cardholders Deserve Protections against Arbitrary Interest Rate Increases
Cardholders Should Be Protected from Due Date Gimmicks
Cardholders Who Pay on Time Should Not Be Penalized
Cardholders Should Be Protected from Misleading Terms
Cardholders Deserve the Right to Set Limits on Their Credit
Card Companies Should Fairly Credit and Allocate Payments
Card Companies Should Not Impose Excessive Fees on Cardholders
Vulnerable Consumers Should Be Protected From Fee-Heavy Subprime Credit Cards

But given the fact that the charge-off rates for credit card loans (
data here) have more than tripled from about 3% in early 2006 to 10.24% in the third quarter of 2009 to a record high 10.24% (see graph above), don't the banks and credit card issuers deserve some protection against reckless, irresponsible cardholders and record-high delinquencies, defaults and charge-off rates?


At 2/22/2010 8:22 PM, Anonymous You Know Who said...

My cards were unilaterally raised to 29 percent annual interest.

I tried to negotiate down to 12 percent, and they could take money straight from my bank account, monthly.

Two cards said yes, the others did not effectively respond. They charged me off.

Odd world.

At 2/22/2010 8:28 PM, Anonymous Anonymous said...

Gee, private debt skyrocketed from 65% of GDP to 105% of GDP from 2004 to 2008.

Banks issued teaser loans to cash strapped consumer.

Consumer bankruptcy protection for credit card debt was lost. Credit card debt is non-dischargeable. Do you think they might have been more willing to take the risk and changing their credit standards?

Booh hooh for the banks.

Maybe we should bail them out for their bad lending decisions.

Poor credit card companies. They just didn't know what they were doing.

At 2/22/2010 8:32 PM, Blogger Steamboat Lion said...

Mark, I think I can infer what a charge off is, but would you mind explaining / defining the term.

At 2/22/2010 8:33 PM, Anonymous Anonymous said...

Gee, if you look at the chart, the last time the default increased was in 2000 to 2001.

Do you think, just maybe, it has something to do with the economy?

Do you think, just maybe, that banks should know how to select and manage risks?


At 2/22/2010 8:46 PM, Anonymous Foundling Father said...

Issuers have 2 products:
1. unsecured cards
2. secured cards

Although I never had in this country, I had a secured MasterCard on a Swiss Bank. It's limit was my total deposit balance in the Swiss Bank. With secured card Issuers have protection. N'est-ce pas?

At 2/22/2010 8:48 PM, Blogger Mark J. Perry said...

Fed: Charge-offs are the value of loans and leases removed from the books and charged against loss reserves. Charge-off rates are annualized, net of recoveries.

At 2/22/2010 9:24 PM, Blogger Unknown said...

No one gets credit unless it was given to them. Therefore, I would find it hard to create laws in favor of lending organizations; who I feel are more at fault for our problems than consumers.

For example, my mailbox is continuously filled with credit card applications wanting my business. Maybe they could save some money by not bombarding everyone with "free money..."

At 2/22/2010 10:26 PM, Anonymous morganovich said...

what do you want to bet that the same people who are demanding:

Vulnerable Consumers Should Be Protected From Fee-Heavy Subprime Credit Cards

will be attacking racist credit card companies in 3 years for not extending credit to subprime borrowers.

At 2/23/2010 12:28 AM, Blogger James Fraasch said...

I think you forgot to turn the /sarcasm switch off and on again.

Credit card companies can change rates and fees just by notifying the customer.

Customer cannot change cards unless they have access to additional credit.

Besides, the CC companies were already bailed out by the taxpayers. See BofA and Citi.

'nough said.


At 2/23/2010 12:29 AM, Anonymous Anonymous said...

It's not just the banks that deserve protection from these deadbeats, it's the responsible cardholders and merchants who must bear the cost of their larceny in the form of higher interest rates and fees. As usual, the marxists are all looking for a free lunch at the expense of others. Their tactics, however, are starting to wear thin as hard working, responsible people are tiring of having to carry their pathetic asses through life. It's not about teaser rates or being "bombarded" with free money, it's about individual character, something too many seem to lack.

At 2/23/2010 3:30 AM, Anonymous Anonymous said...

I, personally, would not mind an annual fee for having my credit card. The credit card company is providing me a service, one I have no problem paying for. I know they get some money from venders, but, my understanding is, not really that much. As I use my card strictly for convenience (I believe that only once, in all the time I have had CCs, did I not pay all of the balance off at the end of the month), the CC company makes no money off me from interest.

And, for this reason, it doesn't seem to "like" me very much. Even though my record with them is spotless (no late payments at all, no current debt), they cut my limit in half! Right now, that's not a big deal, b/c it is still more than I need. But what if I had to pay for a funeral or some such thing (not an impossibility, in my case)? Am I supposed to keep tens of thousands dollars in a lame-o checking account in case that happens? I would happily pay them a fee if they would restore my limit. Also, I personally would like them to get rid of all these "gifts" and "miles" and "cash back" crap. Just let me use the card when I want to and pay it off each month. You don't owe me a "gift," and I won't squawk if you want to charge me for your services!

At 2/23/2010 10:41 AM, Blogger Marko said...

If you don't like the terms of the card, including that the rate is variable and can be changed, don't get the card. Sheesh. Short term high interest loans for consumers are a bad idea, just don't do it. Use a debt card and spend less than you make.

If you have no choice because you need it for emergencies, then don't be surprised if it is expensive.

Sorry, but I have had to learn this lesson the hard way, more than once. No credit cards for me!

At 2/23/2010 1:17 PM, Blogger juandos said...

Credit Card Act of 2009

Why not just call it what it is, protection for the sloppy and stupid?

At 2/23/2010 1:33 PM, Anonymous geoih said...

"... don't the banks and credit card issuers deserve some protection against reckless, irresponsible cardholders and record-high delinquencies, defaults and charge-off rates?"

It's called unsecured debt for a reason. If a bank is silly enough to loan money to people who aren't paying it back, no matter what the interest rate, then that's their problem.

At 2/23/2010 2:29 PM, Anonymous DrTorch said...

Credit Card issuers have been cancelling cards at their own discretion.

Isn't that exactly the sort of protection they need?

At 2/24/2010 12:15 AM, Anonymous Anonymous said...

"3X Inc. in Charge-Off Rate for Credit Cards Since '06 to Record High; Don't Issuers Deserve Protection?"

You've heard the expression: "seeking protection under bankruptcy laws"?

It's the broke pary who gets protection not the creditors!

When a business can't pay it's bills and files for bankruptcy, no one asks, "Do it's creditors deserve protection"?

Why are individuals held to a higher standard of morality than businesses?

Making loans to fools and then extorting huges repayments is called loan sharking and in most cases is illegal except for credit card companies make a lot of money at it.

The banking crisis wasn't caused by credit card defaults. What are the profits from credit cards?

At 2/24/2010 10:01 PM, Anonymous Anonymous said...

Do banks use the same standards when approving small business loans as they do when approving personal credit cards?

Why are individuals treated with different standards than businesses?


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