A new product from Wells Fargo & Co. is the most aggressive step yet in an industrywide push to increase home equity lending.
Under a program started in mid-April, homeowners can transfer credit card debt directly into new or pre-existing Wells second mortgages. The card debt and the existing mortgage can total as much as 100% of a home's value.
Wells Fargo announced the program this month and said more than $160 million of card debt has already been transferred through it.
A growing number of home equity programs are aimed at consumers burdened with credit card debt and other high-cost loans. More than two-thirds of the homeowners who took out home equity loans last year used them to consolidate higher interest rate debt, according recent industry surveys.
"This is an evolving consumer credit category with great potential," said Wells senior vice president Colin Walsh.
Skeptics worry that banks' ambitious marketing of credit-card consolidation loans could ultimately land some consumers in over their heads.
"It leaves the door open for consumers to get back into debt," said Susan Adkins, an analyst with Brittan Associates Inc., Atlanta. In a study conducted last year the firm found that 70% of homeowners who consolidated credit card debt into home equity loans had run the cards back up 11 months later.
"These borrowers still have credit lines," Ms. Adkins said, "and because they've paid them off, the card issuers will increase that line."
But Well's Mr. Walsh said the bank is monitoring debt reloading "very closely."
Wells "wants to work with our customers to balance their debt loads with their capacity to repay," he said.
The bank has drawn up acceptance guidelines based on a minimum of five years of data, and has found that customers with high credit quality tend not to reload debt, Mr. Walsh said.
About 70% of applicants for the loan are accepted, he said.
Consumer debt grew more slowly than expected in the first quarter, rising just 1.4%, or $1.6 billion, according to the Federal Reserve. Nearly 15% of credit card holders repaid their balances during the quarter, according to Moody's Investor Services data-the highest rate in years.
Nonetheless, consumer debt is still at record levels-over $132 trillion in April, according to Federal Reserve data. Savings rates hit an all-time low in May, the Commerce Department said Monday.
Customers who have home equity loans with Wells can transfer credit card balances overnight; new customers have their cards paid off within two weeks. The interest rates range from 8.5% to 10%, versus card rates that average more than 16%.
Satisfied with its prime program, Wells is evaluating making credit card consolidation loans to subprime borrowers, Mr. Walsh said.
