December 12,2008
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Shoring Up the Credit Card Industry, Pt.3 –
– Drawn and Quartered for Quarterly Reports.Previous...
Another change in procedures is the way default credit card holders are dealt with in preventing roll-offs. Roll-offs are generally due to consumer choices based on their options at the time and are the defining point when a consumer decides not to pay the debt at all. It's been found that about 20% of the delinquent credit card accounts that have advanced to the 60 to 90-day category of being late will end up as ‘uncollectible'. That rate has been steadily growing since the recession began (way before it was finally officially admitted). The government is promoting that the credit card lenders develop more innovative ways to work with default customers with more flexible payment plans. Both of these initiatives are expected to reduce roll-offs.As for the third category, ‘Plummeting quarterly reports of the credit card industry', the panic seemed to begin here. All of the other reasons listed were strong contributors all along but, the quarterly reports were the public announcement of doom. The shock and scare factor probably exaggerated the problem but it did, at least, draw immediate attention. Since that time, the industry has been plagued with image problems, most of which come from outside of the scope of the industry's control -- unemployment being the worst. Their respective stock prices fell through the floor over night and have not been able to find favor with Wall Street analysts ever since. Because of continually low ratings by the analysts, the credit card industry's stock prices have plummeted through the floor. There they remain because they can't boost their profits. In fact, the struggle right now is just to find a way to break the fall. Perhaps things will recover more quickly in other areas like securitization, job markets or consumer confidence and they can start showing profits again. Until then, Wall Street will be Wall Street.