This Week in Credit Card News--Unpaid Taxes, Rising Delinquencies & Profit Margins
Bill Hardekopf, Contributor
Credit Card (Photo credit: 401(K) 2012)
Congress is considering whether people would be more likely to pay their taxes if they knew the IRS would report unpaid liabilities to credit bureaus. Currently, the IRS isn’t allowed to report unpaid income taxes as part of an old law that protects taxpayers’ privacy. But Americans, including businesses, owed as much as $373.2 billion as of last year in unpaid federal taxes. On the other side of the argument, the Government Accountability Office says the National Taxpayer Advocated pointed out that some people might refuse to file returns–or might file incorrect returns–if they knew that unpaid amounts would be reported on their credit files. [Baltimore Sun]
Credit Card Delinquencies Increase for Five Major Issuers
Credit Cards Charge Up Healthy Margins
Consumer confidence is up, and household debt is down. This is good news for retailers and credit card processors Visa and MasterCard. Strong revenue is only part of the story. Profit margins jumped sharply from last year for Visa, MasterCard, and Discover. [Investor Business Daily]
Every Big Business is an Analytics Business
For a little over a decade, MasterCard has had a professional services division, MasterCard Advisors, that takes advantage of the company’s deep pool of data and experience in analyzing it. But earlier this year, MasterCard began a new push to sell much more specific data about its cardholders. The company says the information cannot personally identify an individual customer. But information on detailed customer segments and their spending patterns lumps consumers into an “audience,” then defines how the audience will likely spend at a particular category of store–or even a particular merchant–at specific times. Supermarket chains are a likely candidate to become data-miners because this data can give an amazing real-time view of what families are buying and eating at any given moment. [Wall Street Journal]
CFPB Proposal Will Help Stay-at-Home Spouses Get Credit Cards
The Consumer Financial Protection Bureau is proposing a new rule to make it easier for stay-at-home spouses to obtain a credit card. The CFPB proposal allows the stay-at-home spouse or partner to rely on shared income when applying for a credit card account, rather than individual income. “When stay-at-home spouses or partners have the ability to make payments on a credit card, they should be able to obtain a card in their own name,” said CFPB Director Richard Cordray in a statement. “Today the CFPB is proposing common-sense changes that would facilitate credit access for spouses or partners who do not work outside the home.” [LowCards.com]
Younger Chinese Get a Feel for Debt
Consumption loans in China–including mortgages, advances on credit cards, and car and consumer loans–totaled 8.5 trillion yuan ($1.35 trillion) last year, up nearly 27 percent from 2010, according to data from Boston Consulting Group. Credit card lending rose 81 percent to 813 billion yuan and the number of credit cards issued in China rose 24 percent last year to 285 million, according to the China Banking Association. China traditionally prefers cash to credit cards but it is now taking on an increasing amount of debt and opening its market to more lenders. Younger citizens are more willing to spend and to take on debt. Some banks are preparing for more debtors, installing software to catch delinquencies and processes that will help them judge the quality of customers. [Wall Street Journal]
Citigroup CEO Pandit Steps Down
Vikram Pandit, CEO of Citigroup, shocked and surprised both Wall Street and bank employees when he said he was stepping down as CEO and also relinquishing his seat on the board. The bank announced that 30-year Citi veteran Michael Corbat, who was serving as the chief executive of Citi’s Europe, Middle East and Africa division, was taking over the top spot. During his rocky five-year tenure, Pandit navigated the bank through the worst financial crisis since the Great Depression, a period in which Citi’s shares plunged 89 percent, its one-time annual dividend of $5.40 a share was cut to nearly zero, and Uncle Sam bailed out the bank. [USA Today]
Germans Warm to Credit Cards–Slowly
Germans are gradually dropping their historical aversion to credit cards. A Bundesbank survey of payment behavior shows that 7.4 percent of transactions in Germany were paid by credit card last year, double the level in 2008, before the debt crisis began. More than half of transactions continue to be paid in cash, and two-thirds of the survey’s 2,000+ respondents didn’t even own a credit card. [Wall Street Journal]
Consumers Paying Down Debt Helps Boost U.S. Expansion
American’s finances are finally recovering from the worst financial crisis since the Great Depression, according to the Federal Reserve figures. Household debt as a share of disposable income sank to 113 percent in the second quarter from a record high of 134 percent in 2007 before the recession hit. [Bloomberg]
Panel Examines Libor Documents
Congressional investigators are looking into what bankers and regulators knew about possible attempts to manipulate Libor and what they might have done to intervene. Congressional staff began reviewing thousands of pages of Federal Reserve Bank of New York documents regarding its monitoring of banks and a key interest rate, a move likely to intensify the scrutiny of regulators and financial companies involved in the matter. [Wall Street Journal]
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