Na de huizenmarkt komt nu de creditcard crisis (VS).

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DEBT SLOWLY KILLING THE BIG SPENDERS

September 16, 2007 -- Consumer spending - the jet fuel that supplies 70 percent of the economic activity in this country - is in danger of being choked off, the result of mounting credit card debt and falling house prices.

While the subprime mortgage meltdown and its effect on the economy has gotten most of the attention in the media - and while more and more economists feel a recession is likely - the quietly building credit card crisis could have an even uglier impact on the economy, credit experts said.

"The last life preserver of home equity loans has just been ripped away, so families are now alone in a sea of debt," says Harvard Law School's Elizabeth Warren, a law professor and expert on consumer debt. She's referring to the ability of families to turn the rising value of their homes into home equity loans to pay off their fat credit card bills.

"Whether they drown quickly or slowly is an open question, but they will drown," Warren said. "The numbers don't lie on this; there aren't any other options here."

For years, consumers, high on the wealth effect caused by the rapidly rising value of their homes, have added mountains of debt to their credit cards. Homeowners tapped $1.2 trillion in home equity from 2001 to 2006, often to cover credit card debt, according to new research by public policy group Demos.

The Federal Reserve said last week that the amount of revolving debt, mostly on credit cards, held by American families grew by 21 percent, to $907.4 billion, over the past five years.

This far outpaces wage growth and was fueled by the ability to refinance mortgages and to grab home equity loans to pay off the debt.

But now, with housing prices falling, one key tool used to pay off the debt is blocked.

Perhaps not surprisingly, in the first quarter of 2007, Americans paid off their credit card debt at a slower rate compared to the previous year, according to Moody's Investors Service. It was the first time in four years that has happened.

The delinquency rate for credit cards is now 3.02 percent, its highest level in three years, while debt written off by credit card companies soared 28 percent in the first half, according to Moody's.

"We are already seeing a rise in the number of people who simply no longer can pay," says Christian Weller, senior fellow at the Center for American Progress.

Rising credit card debt levels and sinking home prices helped cut consumer confidence this month to its lowest point in 18 months.

Debt-ladened consumers have been a boon to the economy, but if they stumble the aftershocks will be widespread. That's because credit cards occupy a more central place on a family's balance sheet than a mortgage.

When people default on credit card debt, they tend to collapse completely and stop paying all their bills, from the mortgage, to car loans, to health care.

Secondly, the weakening economy means fewer jobs, and less bargaining power for those who remain employed.

Lastly, safety nets are shredding: the personal savings rate averaged a Depression-era 0.4 percent of disposable income last year, while the percentage of private sector workers with health insurance and pensions has dropped.

The gloomy economic news comes ahead of Tuesday's meeting of the Federal Reserve. The central bank is expected to cut interest rates by 25 basis points - although a 50 basis-point cut is not out of the question.

"Consumers are caught in a vice of debt, squeezed even more by credit card company practices that make it very difficult to pay off balances," says Tamara Draut, director of the economic opportunity program at Demos.

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Banks asking for credit card debt forgiveness



Banks losing billions in unpaid credit card bills urge government to forgive consumer debt

WASHINGTON (AP) -- With defaults on credit card debt spiraling amid a global financial downturn, banks already reeling from the mortgage crisis are losing billions more from unpaid credit card bills.

Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

The new pilot program -- which the banks hope will become permanent -- could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower's financial situation, up to a maximum of 40 percent.

"There's obviously a financial benefit to the financial institutions to step up to the plate right now," said Susan Keating, president and chief executive of the National Foundation for Credit Counseling, which has 108 member organizations around the country. "We absolutely support the proposal."

In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely.

Credit cards -- the ubiquitous plastic rectangles that have become an integral part of American life and the economy -- now look to be the latest domino to drop in a financial crisis that started with subprime mortgages and continually takes new twists.

Amid rising job losses, consumers -- even those with strong credit records -- have been defaulting at high levels on their credit cards. Banks already battered by the mortgage and credit crises are bleeding tens of billions in red ink from the losses. The largest credit-card banks each set aside between $1 billion and $3.5 billion in the third quarter for losses on card loans as their profits plummeted.

The biggest credit card lenders include Discover Financial Services LLC, Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Capital One Financial Corp., American Express Co. and HSBC Holdings.

Credit card charge-off rates, balances written off as unpaid, rose to 6.8 percent in August, up 48 percent from a year earlier, according to Moody's Investors Service.

Americans are lumbering under about $900 billion in credit card debt, according to the latest available Federal Reserve figures. People who are in credit counseling, on average, carry seven cards.

Many of the people now having trouble making their credit card payments are in a double or triple whammy: their mortgages or car loans also may be under stress.

And for many, the torrent of envelopes bearing credit card offers at low initial rates -- much like the old "teaser" rates on subprime mortgages -- has recently been replaced by more somber notices of crimped credit lines, hikes in interest rates or even accounts being closed as lenders tighten the reins to reduce their risk.

The new proposal pitched to federal regulators by the Financial Services Roundtable, which represents more than 100 big banks and other financial companies, and the Consumer Federation of America, would allow lenders to reduce by as much as 40 percent the amount of credit card debt owed by deeply indebted consumers in a pilot program.

It recognizes that "there are some critical problems with credit card debt," said Bert Ely, a banking industry consultant based in Alexandria, Va. "We're going to see more of these efforts to try to minimize the situation."

Under the groups' proposal to U.S. Comptroller of the Currency John Dugan, whose Treasury Department agency oversees national banks, a pilot project would allow big credit card companies to sharply reduce the amounts owed by consumers in over their heads who don't qualify for the repayment plans now available.

Nearly all the biggest credit card banks have agreed to such a pilot program in which lenders would forgive as much as 40 percent of the amount consumers owe, allowing them to pay back the remainder over time.

The test program could reach as many as 50,000 borrowers, said Scott Talbott, senior vice president at the Roundtable. Borrowers would have to be in a counseling program for their credit card debt. The amount of debt to be forgiven would be determined case by case, depending on the borrower's financial condition; those receiving close to the maximum forgiveness level would be nearing a personal bankruptcy filing.

And there would be a tax benefit. Borrowers would be able to defer payment of income taxes they owe on the forgiven part of the debt until after the remainder was paid off. The lenders could wait until then to book their loss on the forgiven debt.

"Both parties win," Talbott said.

Current government rules don't allow lenders to offer repayment plans that reduce the amount of principal owed and borrowers to repay the balance over a period of several years. In cases where the principal can be reduced, under credit card settlements, borrowers normally are required to pay off the remainder over months rather than years.

Kevin Mukri, a spokesman for the comptroller's office, had no immediate comment on the new proposal Thursday. Peter Garuccio, a spokesman for the American Bankers Association, also declined to comment.

June Selby, who nearly filed for bankruptcy three years ago when she was buried under nearly $32,000 in school loans, saw both sides but said she didn't like the idea of anyone getting a free ride.

Selby, 60, worked with credit counselors to pay off nearly half the balance and is on track to be debt free by 2011.

"If (the proposal) makes it possible to maintain a sense of integrity and pay back debt without going into bankruptcy, that's one thing," said Selby, a certified nurse in Lawrenceville, Ga.

But she said she was against the idea of a free handout for people who've simply been irresponsible.

"There just has to be some accountability. Nobody is bailing me out. I had to work very hard to keep from bankruptcy and foreclosure," she said.

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Op vrijdag 31 oktober 2008 13:16 schreef simmu het volgende:
dit is niet nieuw hoor. het is al een paar maanden bekend dat mensen hun hypotheek betalen via hun creditcard..........

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U.S. credit card defaults rise to 20 year-high
Mon Mar 16, 2009 6:17pm EDT

By Juan Lagorio

NEW YORK (Reuters) - U.S. credit card defaults rose in February to their highest level in at least 20 years, with losses particularly severe at American Express Co (AXP.N) and Citigroup (C.N) amid a deepening recession.

AmEx, the largest U.S. charge card operator by sales volume, said its net charge-off rate -- debts companies believe they will never be able to collect -- rose to 8.70 percent in February from 8.30 percent in January.

The credit card company's shares wiped out early gains and ended down 3.3 percent as loan losses exceeded expectations. Moshe Orenbuch, an analyst at Credit Suisse, said American Express credit card losses were 10 basis points larger than forecast.

In addition, Citigroup Inc (C.N) -- one of the largest issuers of MasterCard cards -- disappointed analysts as its default rate soared to 9.33 percent in February, from 6.95 percent a month earlier, according to a report based on trusts representing a portion of securitized credit card debt.

"There is a continued deterioration. Trends in credit cards will get worse before they start getting better," said Walter Todd, a portfolio manager at Greenwood Capital Associates.

U.S. unemployment -- currently at 8.1 percent -- is seen approach 10 percent as the country endures its worst recession since World War Two, leaving more than 13 million Americans jobless, according to a Reuters poll of economists.

However, not all were bad surprises. JPMorgan Chase & Co (JPM.N) and Capital One reported higher credit card losses, but they were below analysts expectations.

Chase -- a big issuer of Visa cards -- reported its charge-off rate rose to 6.35 percent in February from 5.94 percent in January. The loss rate for the first two months of the quarter is 126 bps from the previous quarterly average compared to an estimate of a 145 bp increase, Orenbuch said.

Capital One Financial Corp's (COF.N) default rate increased to 8.06 percent in February from 7.82 percent in January.

MORE PAIN AHEAD

Analysts estimate credit card chargeoffs could climb to between 9 and 10 percent this year from 6 to 7 percent at the end of 2008. In that scenario, such losses could total $70 billion to $75 billion in 2009.

"People underestimated the severity of the downturn we are experiencing and I wouldn't be surprised to see them north of 10 percent," said Todd, who added American Express was most exposed to higher credit card losses, given its sole reliance on the industry.

Credit card lenders are trying to protect themselves by tightening credit limits, rising standards, and closing accounts. They have also been slashing rewards, raising interest rates and increasing fees to cushion further losses.

Meredith Whitney, one of Wall Street's best known and most bearish bank analysts, estimates that Americans' credit card lines will be cut by $2.7 trillion, or 50 percent, by the end of 2010 -- and fewer Americans will be offered new cards.

"We believe that the US credit card industry will feel additional credit pain over the next 12-18 months. Until lenders like Capital One show stabilization, followed by trend-bucking improvement over a several-month period, we will continue to remain bearish on credit card lenders," said John Williams, an analyst at Macquarie Research.

Todd said credit card issuers shares -- which are down up to 60 percent in 2009 -- will remain under pressure until the end of 2009, or early next year, when bad loans could start to redeem.

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Op vrijdag 31 oktober 2008 13:22 schreef Drugshond het volgende:
Kan nog lachen worden voor Citigroup... die zitten hier redelijk in.