Credit Cards

It seems that the Fed already clamped down on devious credit card practices at the end of last year. I don't know how I missed this, but the Fed has just released new regulations. Specifically, they have increased consumer protection against "universal default" rate increases, or increasing interest rates after an account is closed, or after transfer to another company or division. The Fed Bank of New York has added a nifty map of card delinquencies to their mortgage map.

No wonder card delinquencies are running away from unemployment. This is a change in the historical trend, and we all know that since all economic models are assward looking, we will have a rich treasure trove of "unexpected" losses.

And there's one other thing I must mention. I credit my friend Rich for this excellent insight: At the same time that people losing their jobs are defaulting, everyone with a job is trying to pay off debt as fast as they can. So CC co's are losing good customers at the same time that their bad customers are costing them more. This will shrink the entire CC pie, and make the bad portion proportionately larger. This trend will also drive delinquency rates higher.