An American Bankers Association report that credit card delinquencies rose for the second quarter in a row raised some eyebrows in the ABS market last week. However, sources say the news may be much ado about nothing, and poses no immediate threat to credit card ABS performance.
The report stated that credit card loan delinquencies reached a record high of 4.81% of accounts in 2Q05, besting last quarter's record numbers of 4.76. The statistics account for the actual number of delinquent accounts, but do not reflect delinquencies as a percentage of outstanding balances, which are at all-time lows as of August.
The increase in the number of delinquent accounts "has not translated into credit card ABS performance yet," said Barclays Capital Associate Director and consumer ABS strategist Juliet Jones. Thirty-plus day delinquencies in credit card ABS pools have trended down year-over-year for the last 24 months consecutively. The ABA report cites higher gas prices as a main driver of the rise in the number of delinquent accounts, however, Jones noted that the consumers most affected by the rise in gas prices are those already burdened with heavy debt loads and those with lower incomes.
For CCABS, said Jones, most of the focus has been on the increase in the minimum payment requirement outlined by regulators, and the bankruptcy reform law set to take effect in mid-October, which had already caused a spike in chargeoffs since it was passed early this spring.
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