COLORADO SPRINGS, Colo -
"People are letting their houses go and are paying their credit cards and their cars. We've never seen that in the industry before," he said. "Usually the credit card is the first thing to go in an economic downturn. People have no equity in their house or are upside down, which makes it an albatross around their necks, so they may as well hold onto their car and their credit cards."
At CEFCU in Peoria, Ill., VP-Lending Keith Reynolds said his chief concern is consumer spending-which has been supported by home equity lending-will slow and be replaced by credit card debt. He said CEFCU is going though its credit card portfolio on a tiered FICO-score basis-similar to risk-based auto lending.
According to Reynolds, consumers with a credit score below 680 are much more likely to have a credit card balance above 50% of their limit. "With that knowledge, we want to be vigilant about annual or quarterly reviews of Visa cards, which might offer a little more risk for us."
Even post-bankruptcy reform, Reynolds said about 35% of CEFCU's Visa losses are related to bankruptcy. "But then again, Visa delinquency in July was the lowest it has been since last October, so I don't believe there are any hidden problems out there that will rear their heads in the next couple months. It's difficult to figure how you could go from delinquency of about 65 basis points to massive problems overnight."
