Chargeoffs Up Nearly 50% in 12-Month Span

The credit quality of American credit cardholders in June was the worst since the 1990-1991 recession, Moody's Investors Service said.

Its survey of consumer credit quality showed bad credit card debts - those that issuers wrote off as uncollectible - jumped almost 50% in the year ended in June.

Bad debts rose to 5.73% of all card loans, from 3.9% a year earlier. For three large issuers, Citicorp, MBNA Corp., and First Chicago NBD Corp., the average loan-loss rate rose to 6.30%, from 4.35%, Moody's said.

That was mostly the result of a sharp increase in First Chicago's losses in June, to more than 9% on card accounts it securitized.

Delinquent card loans rose for the seventh consecutive month to 4.88%, from 3.99% a year earlier, Moody's said. But the credit-rating agency said it expects the weakness in consumer credit to "gradually abate, if the economy remains healthy."

Tighter lending standards by card issuers should also reduce the level of loan losses and delinquent debts, Moody's added. For investors in securities backed by credit-card receivables, "the credit outlook remains stable," Moody's analyst Edward Bankole wrote.

Card issuers have committed enough money to back the securities, he added, to ensure that investors will be paid on time.

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