Credit card delinquencies jump
by admin on 03/02/09 at 4:05 pm
A surge in missed credit card payments late last year could be a warning signal of trouble ahead in the Canadian lending market.
Canadians tend to let payments on their plastic slip before falling behind on other loans including mortgages and car payments, and lenders see a spike in credit card delinquencies as the “canary in the coal mine,” advisory services firm Deloitte said in a report released Tuesday.
“I think it’s an early indicator. But I also think that by acknowledging it and getting ahead of the curve, we can address the situation,” said Pat Daley, partner at Deloitte.
As the economy deteriorated, credit card delinquencies spiked by 5 to 10 per cent in October and November of 2008 from the same period the year before, according to interviews Deloitte did in December with a range of lenders. These included large chartered banks, regional banks, and foreign and single purpose lenders.
Losses related to writeoffs of unpaid customer debt rose from between half to a whole percentage point, which could represent up to $800-million for the industry as a whole, the report said.
In Canada the loss rate resulting from unpaid credit card bills has typically been in the 3 to 4 per cent range, lower than the rate of more than 6 per cent in the United States.
As of February, 2008, outstanding credit card balances in Canada were at more $80-billion, Deloitte said, citing newsletter The Nilson Report. Since 2004, credit card balances have risen by 40 per cent.
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