Finance Crisis Hits Credit Card Business
The financial crisis appears to be spreading to the credit-card business.
Credit card companies say that their charge-offs of delinquent debt from card-holders have spiked to 5.5 percent, and could jump to 8 percent in coming months, a level not seen since the dot-com bust in 2001, The New York Times reports.
Those numbers, coupled with across-the-board layoffs by credit card lenders, mean the industry could lose at least another $55 billion over the next 18 months, analysts told The Times.
As a result, customers with traditionally strong credit scores and buying histories could find themselves being turned down for credit by scared lenders.
"They're worried they've got too much exposure," Gerri Detweiler, credit adviser for Credit.com in San Francisco told the Detroit Free Press. "It's a risk analysis."
Adding to the industry's woes, the Justice Department is investigating American Express Co. for potential problems with its merchant surcharging.
Reuters reports that government investigators also asked for documents related to the company's "anti-steering" policies, which prohibit merchants from discriminating against the AmEx credit card in favor of other forms of payment.
The fourth-largest U.S. credit card lender has already announced this week it would cut about 7,000 jobs, or 10 percent of its worldwide work force, in order to save $1.8 billion in 2009.
To cushion the dual blow of tighter credit and a sputtering economy, banks and consumer groups are working together to push regulators to ease some consumers' credit card debt, USA Today reports.
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Posted by: waynebrown10 | November 3, 2008 7:35 PM