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In times like these, an optimistic outlook for credit card issuers in 2009 means only having to contend with the normal difficulties of a recession: lower consumer spending, higher unemployment, and higher delinquencies and charge-offs of credit card debts. That is according to a report released today by Maynard, Mass.-based Mercator Advisory Group LLC. "Not to belittle a recession. It's not fun, and some issuers get into trouble, but issuers have been through them before," Ken Paterson, director of Mercator's credit advisory service and author of the report, tells CardLine sister publication Cards&Payments. Paterson says he hopes the new Term Asset Backed Securities Loan Facility, announced by the U.S. Federal Reserve and the U.S. Department of the Treasury last week (CardLine, 11/25), and other federal market interventions will solve "dire funding constraints" in time to help credit card issuers keep revolving loans flowing to consumers and small businesses. With that funding headache lessened, issuers could more-easily face recessionary charge-off rates peaking at 8% of receivables, Paterson writes. That would help reassure potential buyers that asset-backed securities, which fund nearly half of card loans, are reasonable investments, he adds. Another favorable condition would include the arrival of some stability in housing prices by the end of 2009, helping to offset growing unemployment throughout the year, Paterson adds. If all of those events occur, card-based outstanding receivables likely would continue to grow at 2% to 3% during 2009, issuers would begin expanding solicitation efforts in the second half of the year, minimum FICO-score requirements for account origination would begin fall from currently elevated levels, and investments in asset-backed securities would begin to return to normal, according to Patterson.
