Credit card issuers hurt
December 9th, 2005 | by mbhunter |A lot of people in financial trouble got out while the gettin’ was good before the new bankruptcy law went into effect — half a million people in the two weeks prior to the law changeover. Naturally, this mass exodus hit credit card lenders in the gut because loan chargeoff figures spiked.
The new law backfired a bit on the credit card issuers, no?
It still is unclear whether the number of filings per month will climb more or less, because now it’s more difficult to file. But now the credit card issuers most live with what they’ve asked for, because the other edge of the sword is more difficulty in writing off bad loans. Repayment plans can take years, and though the repayment, if it happens, is better than nothing, the loan account is still open on the books, which makes obtaining new business more difficult.
As easy as it’s been to get credit recently, I don’t feel that bad for the issuers. There are high default rates because they weren’t as discriminating as they could have been. The issuers saw this coming, and asked Uncle Sam to help keep those payments coming back to them, which he did, but now the lenders will be waiting a long time for them to come back.
2 Responses to “Credit card issuers hurt”
By Adult ADD and Money on Dec 9, 2005 | Reply
While I will agree that chrageoffs were accelerated because of the mass filing,
and credit card companies will lose some interest income due to higher minimums. They will make up the money in the usage fees charged to the stores. People will be more inclined to use their cards because the higher minimums frees up more space.
By mbhunter on Dec 9, 2005 | Reply
ADD, hadn’t thought that they’d raise the merchant fees. That’s a possibility. Since Visa and MC are pretty much the leaders, they can do this without too much impunity.