Overdue credit card payments on rise

By Peter Eichenbaum
Bloomberg News / October 16, 2009

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NEW YORK - JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc., the biggest US credit card lenders, said more customers fell behind on payments in September as Credit Suisse Group AG forecast industry losses will mount for at least another year.

While the three banks, American Express Co., and Discover Financial Services all said actual write-offs fell in September, the surge in loans at least 30 days overdue, a signal of future defaults, may extend record industry losses. Card issuers typically write off loans after 180 days.

Of six US card issuers that released data yesterday, only New York-based Amex didn’t report an increase in defaults and delinquencies, while Capital One Financial Corp. was the lone issuer to report both higher losses and late payments. Moshe Orenbuch, Credit Suisse analyst, cast doubt on the idea that consumer credit is stabilizing.

“The combination of continued job losses and increasing bankruptcies means that the improvement in losses is over a year away,’’ Orenbuch wrote in a research note.

Loans at least 30 days overdue climbed to 4.69 percent from 4.48 percent in August at JPMorgan, and to 7.53 percent from 7.47 percent at Bank of America, the companies said in federal filings. Loans at least 35 days late rose to 5.5 percent from 5.38 percent at Citigroup, according to a separate filing by the New York-based lender.

Credit card defaults historically track US unemployment, which climbed to 9.8 percent in September, the highest since 1983. Defaults averaged 6.82 percent in August 2008, when the jobless rate was 6.2 percent.

Discover said late payments increased to 5.57 percent in September, from 5.35 percent the previous month. Capital One, the third-biggest issuer of Visa credit cards, said delinquent loans rose to 5.38 percent from 5.09 percent.