CHESSNOID

First of all there are conflicting reports on credit card delinquency rates.  I would expect in a good economy, the delinquency would improve and of course in a bad economy the delinquency rate would get worse.  The consumer bailout also known as bankruptcy are on the rise which should represent increased delinquency on most consumer loans and credit cards.

According to the bank and credit card issuers the delinquency rate has declined.  This is what the latest Reuter’s article reports:

NEW YORK, Aug 17 (Reuters) –

The rate of U.S. credit card defaults showed signs of stabilizing last month, an indication that American consumers may not be in as bad shape as feared despite job losses and the housing slump.

Bank of America Corp (BAC.N) in a regulatory filing on Monday said credit card default rates dropped in July after several months of a steep deterioration. JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), and Discover Financial Services (DFS.N) also said bad-loan levels fell.

“It just seems to bear out what we heard in the second-quarter calls, that things seem to be getting marginally better — and I would stress marginally — on the consumer side,” Nancy Bush, founder of NAB Research, said of Bank of America.

Bank of America, the bank with the highest default and delinquency rates among the top credit card issuers, said its charge-off rate — debt the company believes it will never collect on — inched down to 13.81 percent in July from 13.86 percent in June.

“There’s a seasonality concern. There’s also a more legitimate concern that we’re finishing up the first wave that was related to subprime and now we’re going to get into the second wave related to good old recession losses,” Bush said.

Even more encouraging was JPMorgan’s report that defaults fell to 7.92 percent from 8.04 percent for second straight month, while Citigroup’s default rate declined to 10.03 percent from 10.51 percent.

Discover’s charge-off rate fell to 8.43 percent from 8.75 percent.

Then in another article it points out that consumer bankruptcies are up by 34%.  Bankruptcies allow consumers to wipe out all credit card debt and are forgiven.  That means the credit card bills don’t have to be paid back.  This is the original consumer bailout that no longer has the negative  stigma it once had.  Especially when all businesses now are doing it and getting taxpayer bailouts to boot.

NEW YORK (CNNMoney.com) —

Consumer bankruptcies surged in July to their highest level since October 2005 as U.S. households struggle under the burden of past debt and rising unemployment.

Total filings reached 126,434 in July, a 34.3% increase from the same period a year ago and an 8.7% increase over June, according to a report released Tuesday from the the American Bankruptcy Institute.

The number of filings was the highest monthly total since the Bankruptcy Abuse Prevention and Consumer Protection Act went into effect in October 2005.

“Today’s bankruptcy filing number reflects the sustained and growing financial stress on U.S. households,” said ABI Executive Director Samuel J. Gerdano in a written statement.

Fewer jobs, less income: Without a job, consumers are hard pressed to pay their bills as their debt climbs.

“Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year,” said Gerdano.

The unemployment rate currently stands at 9.5%, a 26-year high. And the job market doesn’t look to be improving anytime soon. The government releases July jobs numbers on Friday, and unemployment is expected to rise to 9.6%, according to a consensus estimate of analysts polled by Briefing.com.

These two reports are not mutually exclusive. When bankruptcies go up so do credit card accounts that are written off.  Every personal bankruptcy represents an average of 6-10 credit cards that are just eliminated and become no longer collectible.

The bank credit card delinquency are company reported and do not match the public records of bankruptcies filed which was up 8.7% from June to July.  Again, the banks and credit card companies are cooking their books by under reporting charge offs, delaying the accounts to be written off,  and not reflecting the true number of  increasing  bankrupt accounts.

It is highly unlikely that these bailed out banks and credit card companies that were on the verge of credit extinction with record losses turned it around and became profitable in a month just by a laying off their employees and cutting everyone’s credit lines.