From The Financial Times
Defaults on credit card bills in US risingNow admittedly a lot of this is fallout from the subprime mortgage situation. However I can't help but wonder how much of the current crisis and this current depressing credit card default trend aren't attributable to the changes in credit card and bankruptcy laws that W pushed through a few years ago.US consumers are defaulting on credit card payments at a significantly higher rate than last year, raising the prospect of problems in the stricken US subprime mortgage market spreading to other types of consumer debt.
Credit card companies were forced to write off 4.58 per cent of payments as uncollectable in the first half of 2007, almost 30 per cent higher year-on-year. Late payments also rose, and the quarterly payment rate - a measure of cardholders' willingness and ability to repay their debt - fell for the first time in more than four years.
Analysts at Moody's, the rating agency, said the trend could be related to the slowdown in the US property market and fewer borrowers rolling mortgage debt into new, cheaper home loans.
"The combination of higher interest rates and a softer real estate market diminished the attractiveness of mortgage refinancings in which many borrowers reduced their more expensive credit card debt by drawing on the equity in their home," Moody's said.
From the Chicago Tribune:
"Now that the easy money in home mortgages is all but over, consumers may soon be caught in a financial squeeze with their credit cards.
That's the worry among some economists and credit counselors as home lending has shifted abruptly into low gear this summer. That leaves homeowners owing big sums to Visa or MasterCard without an important escape hatch -- the ability to pay down the plastic by dashing off a check from their home equity line of credit or rolling the debt into a new, bigger mortgage.
h/t to The Big Picture
|