August 19, 2009
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Weathering CC Weather, Pt.2
Forecast is: "Cloudy 'til next year".More and more, this is becoming the rule. One of the provisions of the up-coming credit card reform bill is the disallowance of retroactive rate hikes. No more high-rate slams on principle you owe from earlier periods. Credit card interest rate hikes must be announced in advance and will only apply to amounts charged after that time. So, while the window is still open, major credit card lenders are "sticking it to" hapless and vulnerable card holders.
This scenario is a real one though not an isolated one. Millions of other credit card holders across the country are experiencing the same thing -- these, seemingly arbitrary, hikes in rates. By mid-2010 this harmful practice should all be behind us. But for now, we have to stick it out and weather the CC weather. The BBB (Better Business Bureau) has been warning this that this was coming. Listed biggies were: HSBC, CapOne, AmEx, Citibank and B of A. Consumers have been warned going back to May of this year that millions of credit card rate hikes were imminent.
The main reason given was owing to the collapsed economy and the unprecedented rate of credit card defaults across our land and, indeed, the world. The reason only the major lenders are so frequently mentioned is because, between them, only six of these lenders are holding the liability for 90% of all the credit card debt. Their current losses due to "charge-off"s (uncollectible debt) are staggering. They're doing everything they can to shore up finances before February when the lid comes down on them.
Meanwhile, the credit card lenders, themselves, are going through hard times. For example, even after posting a second-quarter rise in profit on investment banking fees, JPM CEO Jamie Dimon says he doesn't expect to see a profit on the credit card end either this year nor next. The original JPMorgan/Chase credit card accounts portfolio is forecast to be a 10% loss for next quarter.
The Former WaMu credit card accounts, which Chase acquired this year, are looking much worse. Those losses may approach 24% by the end of the year. The credit card losses for last quarter were $672 million.