American Express and Chase reporting lower delinquencies and charge-offs
Credit Card Delinquinicies
In a regulatory filing Wednesday, American Express reported that delinquencies on credit cards were down to 4.4 percent compared to 4.7 percent in May and 4.9 percent in April.
Capital One reported similar figures, stating its delinquency rates improved for a fourth straight month, falling to 4.77 percent from 4.9 percent in May.
Investors were happy with the improving delinquency data, causing shares of American Express to rise by $2.76, an increase of 11.3 percent, to close at $27.22. Capital One rose $2.73, or 11.8 percent, to $25.84.
Debt Collections
Bloomberg.com reported that debt collection costs also fell, from 10 percent in May to 9.9 percent in June. While not a huge reduction, it signals that the record charge-offs and delinquencies that have wounded the credit card industry over the past 18 months might be easing up.
With unemployment being so high and the foreclosure forecast looking unfavorable, many people are asking how it is possible for delinquencies to be going down.
One factor may be President Barack Obama’s much-hyped credit card bill, which limits certain billing practices and effectively prevents credit card companies from irresponsibly offering low-rate credit only to hike fees and interest rates later. Before the legislation takes effect next year, credit card companies have been combing through their existing customer base to weed out the riskiest borrowers. As part of this process, some issuers, in an effort to tidy up their books, have been more willing to settle outstanding debts with consumers, leading to better write-off results this quarter.
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