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Tuesday, June 13, 2017

Americans are suddenly defaulting on their credit cards

The American economy has looked pretty robust of late — unemployment just hit a 16-year low, and stocks recently reached an all-time high. This makes it all the more curious that Americans have suddenly stopped paying off their credit-card bills at a rapid rate.

In the past two fiscal quarters, banks reported a steep rise in credit-card charge-offs — debt that companies can't collect from their customers — according to a report from Moody's.

The sharp increase, the largest since 2009, is especially unusual given how strong the US employment market has been, Moody's noted. It suggests that American consumers haven't fallen on hard times so much as banks have started to loosen their standards and issue credit more aggressively.

Card issuers have been much stricter since the financial crisis and the passing of the Card Act in 2009, which added an array of protections for consumers. Getting a credit card got a lot tougher, especially if you had subprime credit.

So, charge-offs spiking when unemployment claims are low indicates that banks have lowered their standards and are approving people for cards who aren't as creditworthy.

http://www.businessinsider.com/credit-card-defaults-have-spiked-as-lending-standards-fall-2017-6


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