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Card issuers looking to sell their portfolios because of economic and other industry challenges are having more difficulty than ever finding buyers. Demand for typical card portfolios has dried up along with the economy, according to Jim Walsh, president and CEO of Peterboro, N.H.-based Brookwood Capital LLC, which consults with buyers and sellers of credit card portfolios. "I am getting tons of calls, but I can't find buyers for most of these card portfolios," Walsh tells CardLine sister publication Cards&Payments. Buyer interest continues in portfolios consisting mostly of variable-rate accounts, those carrying an average charge-off rate of less than 4% and those with accountholders that have high FICO scores. But it is rare to see such portfolios on the selling block, Walsh notes. Card portfolios with variable-rate accounts are likely to provide a greater hedge against future economic changes, he notes. "Card portfolios with fixed accounts could be a bigger liability if inflation starts to rise," Walsh says. And under the Credit Card Accountability, Responsibility and Disclosure Act signed into law last May, it soon will be more difficult for issuers to change the interest rates on cardholders' existing and future card balances. Under the new card rules, beginning Aug. 20, issuers must provide cardholders with 45 days' notice of any changes in account terms. Restrictions on issuers raising interest rates on cardholders' existing balances begin Feb. 22, 2010. Portfolio buyers also take a keen interest analyzing the charge-off rates of prospective portfolios because charge-offs are "a huge indicator of future profits and losses," Walsh says. Demand for card portfolios has fallen steadily for the past two years, he notes. "Two years ago, sellers could get a 25% premium on their portfolios, but as charge-offs have risen and profitability has fallen, it has become increasingly difficult to find buyers for a lot of typical portfolios."
