June 18, 2010
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News: JPMorgan Gaining Momentum
Things seem a bit more optimistic around JPMorgan Chase these days as results for May's credit card defaults and delinquencies are looking up. The bank wrote off 8.95 percent of total card balances which was down from 9.03 percent the previous month. According to the bank's filing with the Securities and Exchange Commission, credit card delinquencies of 30 days or more decreased to 4.2 percent in May, down from 4.4 percent in April. It was the fourth consecutive month that credit card delinquencies declined and the lowest rate since July 2009. The number is significant because future defaults are derived from card delinquencies.
Chase joins the top six U.S. credit card issuers in posting decreased defaults and delinquencies. Bank of America Corp. and Discover didn't fare as well. As JPMorgan prepares to face a court ordeal on allegations of violating federal law, increased earnings and fewer card defaults will most likely be needed to pay legal expenses and possible fines and restitution. The bank is charged with failing to notify credit cardholders before raising interest rates because the cardholder was late with payments. The issue was addressed with the CARD Act 2009, however, the incidents in questioned occurred prior to the new legislation. Chase defended its actions by saying that in its card agreement, it disclosed the conditions that cardholders must comply with to remain eligible for lower interest rates. The bank also noted what the maximum interest rate would be if the cardholder violated those terms. The Supreme Court is expected to hear the case sometime this fall.
Over the past year, the credit card industry has continued to decline as unemployment has risen to historical highs. However, a decline in the industry's card defaults is a sign that the financial industry as well as Americans are beginning to recover from the recession. Nevertheless, unemployment continues to remain high. As long as it does, lenders will continue to have high card delinquencies and defaults, however, it is believed the greatest portion has already occurred.