CHESSNOID

So the reports came out and it shows some credit card companies are doing better than others.  That is odd because the economy is getting worse and unemployment is at a national rate just under 10%.  The question is how did they perform substantially better than the other credit card companies.

An argument could be made that some credit card companies screened out their portfolios better than others. That would mean they had a computer program that had a model to determine which potential customers were more likely to default vs others.

Given that the defaults increased due to an increase in unemployment, it is highly unlikely that a computer program existed to  predict who would be laid off during a recession. My personal experience in the collection field would lead me to expect the credit card companies are doing the same thing that they always do. Everyone has a loss mitigation program to get everyone back into current status.

With the harshness of the recession, these credit card companies must be more aggressive to get their portfolios under control. They offer a one pay payment program to bring the loan current even if you are 3-6 months past due. This of course doesn’t resolve the customers’ issue of unemployment or lack of income, but it does give the company a method of reducing overall delinquency on the books. Some companies I have worked with would even do no payment offers to bring a loan to a current status as long as the customer would sign an agreement they would start payments again.

Are any of these accounts legitimately current ? No, but they will be reported that way so they can generate reports that will be more favorable to its investors. Are these credit card companies who are doing better than others and beating the unemployment rates doing the same thing?  I personally don’t know, but it wouldn’t surprise me if they did.  Since it is more likely they are cooking the books than making better decisions who to give credit cards to.

Boston.com

NEW YORK – JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc., the biggest US credit card lenders, said more customers fell behind on payments in September as Credit Suisse Group AG forecast industry losses will mount for at least another year.

While the three banks, American Express Co., and Discover Financial Services all said actual write-offs fell in September, the surge in loans at least 30 days overdue, a signal of future defaults, may extend record industry losses. Card issuers typically write off loans after 180 days.

Of six US card issuers that released data yesterday, only New York-based Amex didn’t report an increase in defaults and delinquencies, while Capital One Financial Corp. was the lone issuer to report both higher losses and late payments. Moshe Orenbuch, Credit Suisse analyst, cast doubt on the idea that consumer credit is stabilizing.

“The combination of continued job losses and increasing bankruptcies means that the improvement in losses is over a year away,’’ Orenbuch wrote in a research note.

Loans at least 30 days overdue climbed to 4.69 percent from 4.48 percent in August at JPMorgan, and to 7.53 percent from 7.47 percent at Bank of America, the companies said in federal filings. Loans at least 35 days late rose to 5.5 percent from 5.38 percent at Citigroup, according to a separate filing by the New York-based lender.

Credit card defaults historically track US unemployment, which climbed to 9.8 percent in September, the highest since 1983. Defaults averaged 6.82 percent in August 2008, when the jobless rate was 6.2 percent.

Discover said late payments increased to 5.57 percent in September, from 5.35 percent the previous month. Capital One, the third-biggest issuer of Visa credit cards, said delinquent loans rose to 5.38 percent from 5.09 percent.