Posted on 02/04/2009 7:40:34 PM PST by TigerLikesRooster
Credit card delinquencies at record high
By Saskia Scholtes in New York
Published: February 4 2009 23:33 | Last updated: February 4 2009 23:33
US credit card delinquencies hit a record high in January, and further deterioration is likely as the economy slows down and unemployment rises, Fitch Ratings says.
Payments at least 60 days late rose almost half a percentage point last month to a record 3.75 per cent, said Fitch. Credit card lenders also wrote off loans to delinquent borrowers at close to record levels, and such “charge-offs” were expected to breach records in the coming months.
Michael Dean, managing director at Fitch, said: “US consumers continue to struggle in the face of mounting pressures on multiple fronts from employment to housing to net worth.”
Late payments on credit cards crept higher throughout 2008, said Fitch, but signs of borrower stress rose in the fourth quarter as late payments surged by 18 per cent. Charge-off rates in January were 40 per cent higher than a year ago at 7.5 per cent and were expected to approach 9 per cent during the second half of 2009.
Late payments and defaults on credit cards have been closely linked with levels of unemployment, which have risen dramatically. Non-farm employment fell 524,000 in December, contributing to the biggest decline in payrolls on a three-month moving average since 1945. The unemployment rate jumped to a 15-year high of 7.2 per cent, from 6.8 per cent in November.
(Excerpt) Read more at ft.com ...
Ping!
Surprised anyone?
In 2008 our banks lost 4.6 trillion in real estate and have only 1.4 trillion in assets. In theory our banks are insolvent, but the US government is infusing trillions via treasury note sales and printing of dollars. The government is barely covering the bank losses to avoid financial collapse and civil disorder. In 2009, commercial real estate will collapse as stores and offices close from the recession, and as unemployment rises, defaults on credit card debts will rise. The banking system will be hit by these new financial crisis. Question is can the federal government replenish these banks again or will they be overwelmed causing a total collapse of the world and US financial system. My recommendation to all freepers is to go into survival mode. Organize your family and street, and if possible town for the coming crisis. Stock food, guns and ammo, water and get organized. Wash DC is clueless and are in no position to save you.
Well, they don't know that it may take a while but when Americans blow, it will be big.
No worries. The banks will try and compensate by hitting their other customers harder, possibly pushing underwater a few who are still financially afloat.
In other words, some of these delinquencies are of the banks’ own making.
Maybe a lot of people ran up their cards before Christmas figuring that Obama would somehow wipe out their debts as soon as he took office. Oh well.
Regulators Adopt New Credit Card Rules
Thursday, December 18, 2008
Adam Samson, FOXBusiness
A sweeping reform of credit card rules aimed at helping consumers hit by confusing, and sometimes deceptive, practices by creditors is on the path to regulator approval.
The Office of Thrift Supervision and The Federal Reserve said Thursday they approved of the new rules.
"The revised rules represent the most comprehensive and sweeping reforms ever adopted by the Board for credit card accounts," said Federal Reserve Chairman Ben S. Bernanke. "These protections will allow consumers to access credit on terms that are fair and more easily understood."
Creditors will have to disclose interest rates when accounts are opened, and will be prohibited from hiking rates unless they are "expressly permitted," according to a release by The Office of Thrift Supervision. They will, however, be allowed to adjust rates after the account has been open with 45-day notice.
Industry participants say the new regulations could dramatically alter the credit card market.
The new regulations "are unprecedented in their scope and signal the beginning of a new market structure for credit cards," said American Banker Association President Edward Yingling.
Yinging, however, notes these changes can potentially increase borrowing costs for consumers, and even cut credit availability.
Creditors are also permitted to charge introductory rates that change after a certain period provided such stipulations are disclosed when the account is opened. Interest rates can also be increased on accounts that are over 30 days delinquent, the release said. These new disclosure rules will give consumers "the ability to easily compare the terms of different credit cards and make more informed decisions about their personal finances," according to Yingling.
The rules, which are expected to go into effect on July 1, 2010, will also require customers to receive a “reasonable amount of time to make their credit card payments,” The Office of Thrift Supervision said. Although exact figures aren't provided, The Office of Thrift Supervision says 21-days would be considered a reasonable amount of time. Excessive lump-sum-fees on high-risk clients will also be curbed.
Billing regulations, such as banning so-called double-cycle billing and increased requirements clients' payment allocation will also initiated. ...more
http://www.foxbusiness.com/story/markets/economy/regulators-adopt-new-credit-card-rules/
In the case of my daughter it's a bad choice in boyfriends. The family has paid off her cards twice in the past, and she's right back in debt again. She's going to have to suffer a bit this time I'm afraid if she's going to learn her lesson.
I'll tell ya why. Americans for the most part are a patient, friendly people.
But when Americans are pushed too far, they can be the most violent on this planet, bar none.
If the government pushes the people of this country too far, those in government will find themselves juggling razor sharp chain saws that will cut them to pieces.
I'd really hate to see it come to this.
Her car's no sports car, but he has crashed it at least a couple of times. Yes, he does have problems with all but the gambling.
BS! It's linked to people who live beyond their means.
As a business owner I have seen it for YEARS not just recently.
You would be surprised at how many people 'can't pay their bills' but they don't quit buying designer handbags, shoes, concert tickets, new cars, new houses, their children take dancing, theater, photography, computer classes, piano, voice, they don't miss the weekly hair stylist, manicurist, they take three or four vacations, their grocery cart looks like a party ready to happen and the list goes on.
I'm not even sure many of these people would know how to live within their means. They have never done it.
No sympathy here!
Highlights of Final Rules Regarding Credit Card Accounts
Regulation AA (Unfair Acts or Practices) Final Rule
The final rule amends Regulation AA to prohibit unfair or deceptive acts or practices by banks in connection with credit card accounts. The effective date for the Regulation AA amendments is July 1, 2010.
Time to Make Payments
The final rule prohibits banks from treating a payment as late for any purpose unless the bank provides a reasonable amount of time for the consumer to make that payment. The rule provides a safe harbor for banks that send periodic statements at least 21 days prior to the payment due date.
Allocation of Payments
When different annual percentage rates (APRs) apply to different balances on a credit card account (for example, purchases, balance transfers, cash advances), the final rule requires banks to allocate payments exceeding the minimum payment to the balance with the highest rate first or pro rata among all of the balances.
Increasing Interest Rates
The final rule requires banks to disclose at account opening all interest rates that will apply to the account and prohibits increases in those rates, except in certain circumstances. First, if a rate disclosed at account opening expires after a specified period of time, banks may apply an increased rate that was also disclosed at account opening. Second, banks may increase a rate due to the operation of an index (in other words, the rate is a variable rate). Third, after the first year, banks may increase a rate for new transactions only after complying with the 45-day advance notice requirement in Regulation Z. Fourth, banks may increase a rate if the minimum payment is received more than 30 days after the due date.
Two-Cycle Billing
The final rule prohibits banks from calculating interest using a method referred to as “two-cycle billing.” Under this method, when a consumer pays the entire account balance one month, but does not do so the following month, the bank calculates interest for the second month using the account balance for days in the previous billing cycle as well as the current cycle.
Financing of Security Deposits and Fees
The final rule addresses concerns regarding subprime credit cards with high fees and low credit limits. Banks would be prohibited from financing security deposits and fees for credit availability (such as account-opening fees or membership fees) if charges assessed during the first 12 months would exceed 50 percent of the initial credit limit. The rule also limits the security deposits and fees charged at account opening to 25 percent of the initial credit limit and requires any additional amounts (up to 50 percent) to be spread evenly over at least the next five billing cycles.
Regulation Z (Truth in Lending) Final Rule
The final rule amends Regulation Z to improve the effectiveness of the disclosures consumers receive in connection with credit card accounts and other revolving (non home-secured) credit plans. The effective date for the Regulation Z amendments is July 1, 2010.
Applications and solicitations
The final rule contains format and content changes to make the credit and charge card application and solicitation disclosures more meaningful and easier for consumers to use. These disclosures are provided in the form of a table that summarizes the key account terms.
The changes include:
Format Revisions
New format requirements for the summary table include rules regarding type size, the use of boldface type for certain key terms, and the placement of information.
Content Revisions
Creditors must disclose the duration that penalty rates may be in effect, simplify disclosures about variable rates and revise disclosures regarding when a grace period is offered on purchases or when no grace period is offered.
Account-opening disclosures
The final rule enhances the cost disclosures provided at account opening to make the information more conspicuous and easier to read. Certain key terms must be disclosed in a summary table at account opening, which is substantially similar to the table required for credit and charge card applications and solicitations.
Periodic statement disclosures
The final rule contains revisions to make disclosures on periodic statements more understandable, primarily by making changes to the format requirements, such as by grouping fees and interest charges together.
The changes include:
Interest Charges and Fees Interest charges and fees must be grouped separately, with a monthly total for each. Interest charges must be itemized according to the type of transaction (such as interest charged on purchases, and interest charged on cash advances). Separate year-to-date totals for fees and interest charges are also required.
Effective APR
The requirement to disclose an “effective annual percentage rate” is eliminated due to the lack of consumer understanding of this term. New requirements to disclose interest and fee totals for the month and year-to-date should more effectively inform consumers of the total cost of credit.
Minimum Payment Disclosure
The effect of making only the minimum required payment on the time to repay balances must be disclosed, as required by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.
Changes in consumer’s interest rate and other account terms
The final rule expands the circumstances under which consumers receive written notice of changes in the account terms (such as, an increase in the interest rate), and increases the amount of time these notices must be sent before the change becomes effective.
The changes include:
Increase in Advance Notice for Changes in Terms
The final rule increases the amount of advance notice before a changed term can be imposed from 15 to 45 days to better allow consumers to obtain alternative financing or change their account usage.
Requiring Prior Notice for Penalty Rate Increases
Creditors must provide 45 days’ prior notice before the creditor increases a rate due to the consumer’s delinquency or default or as a penalty.
Summary Table
When a change-in-terms or penalty-rate notice accompanies a periodic statement, the final rule requires creditors to provide a tabular disclosure on the front side of the periodic statement showing the key terms being changed.
Additional protections
The final rule includes the following additional protections for consumers:
“Fixed” Rates
Advertisements may refer to a rate as “fixed” only if a time period is specified for which the rate is fixed and the rate will not increase for any reason during that time, or if a time period is not specified, if the rate will not increase for any reason while the plan is open.
Cut-off Times and Due Dates for Mailed Payments
Creditors must set reasonable cut-off hours for mailed payments to be considered timely on the due date. The final rule deems 5 p.m. to be a reasonable time. When mailed payments are not accepted on the due date, such as on weekends or holidays, creditors must consider a payment received on the next business day as timely.
Highlights of Rules Regarding Overdraft Services
Regulation DD (Truth in Savings) Final Rule
The final rule amends Regulation DD to address depository institutions’ disclosure practices related to overdrafts. The effective date for the Regulation DD amendments is January 1, 2010.
Disclosure of Aggregate Overdraft Fees
The final rule extends to all institutions the requirement to disclose on periodic statements the aggregate dollar amounts charged for overdraft fees and for returned item fees (for the statement period and the year-to-date). Currently, only institutions that promote or advertise the payment of overdrafts must disclose aggregate amounts.
Disclosure of Balance Information
The final rule requires institutions that provide account balance information through an automated system to provide a balance that does not include additional funds that may be made available to cover overdrafts.
Regulation E (Electronic Fund Transfers) Proposed Rule
The proposal amends Regulation E to provide consumers certain protections relating to the assessment of overdraft fees. The proposal replaces previously proposed amendments under Regulations AA and DD addressing overdraft services.
Consumer Choice Regarding Overdraft Services
The proposal solicits comment on two approaches to providing consumers a choice regarding the payment of ATM and one-time debit card overdrafts by their financial institution.
Opt-out
Under one approach, an institution would be prohibited from imposing an overdraft fee unless the consumer is given an initial notice and a reasonable opportunity to opt out of the institution’s overdraft service, and the consumer does not opt out.
Opt-in
The second approach would prohibit an institution from imposing an overdraft fee for paying such overdrafts unless the consumer affirmatively consents (or opts in) to the institution’s overdraft service.
Debit Holds
The proposal would prohibit institutions from imposing an overdraft fee when the account is overdrawn because of a hold placed on funds in the consumer’s account that exceeds the actual transaction amount. The proposed rule is limited to debit card transactions in which the actual transaction amount generally can be determined within a short period of time after the transaction is authorized (for example, transactions at gas stations and restaurants).
http://www.foxbusiness.com/story/markets/economy/regulators-adopt-new-credit-card-rules/
I think the credit card providers are causing more delinquencies by jacking up rates 3-4 percent on many cardholder’s accounts. When people are living on the brink of insolvency, its going to hurt both the lenders and the borrowers.
I believe that the real reason is because Democrats sat on their lazy asses and did nothing when gas prices skyrocketed above four dollars a gallon. As soon as President Bush signed an executive order to allow expanded offshore drilling then prices plummeted but a lot of damage had already been done. And now it catches up with many who were teetering on the edge many more were pushed into home foreclosure by these same high gas prices. Now Barack Hussein Obama wants to reverse President Bush’s good deeds.
No...not in the least. The above article is telling me The Snowball Train to Full blown Depression just increased its speed another 5 mph.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.