MCLEAN, Va.—Growing losses at one of the biggest credit card issuers—Capital One—is another sign that consumer debt may be reaching unmanageable levels.
As CUToday.info reported in its series on consumer debt, several analysts believe consumers are taking on too much card debt, approaching pre-recession levels, and auto loan delinquencies are ticking up—particularly in subprime. Even the mortgage market recently showed some signs of repayment weakness, as CUToday.info also reported, along with several major banks recently announcing they are pulling back on auto lending due to concerns over borrowers.
Americans are increasingly struggling to repay their credit card bills, as was displayed during Capital One's first-quarter earnings results, which showed a much higher rate of loan losses among its credit card unit than both its management and investors expected, Bloomberg reported.
“Not only did its provisions for losses in its U.S. card unit surge 33% from the preceding quarter, but Capital One also reported that its write-off rate in the unit rose to 5.1%, the highest in almost six years. In addition, the company changed its explanation for the rapid deterioration in credit quality, now attributing the weakness to consumer behavior rather than a surge in loan growth and aging loans,” Bloomberg reported.
As CUToday.info recently reported, Discover Financial Services reported loan charge-offs have moved up meaningfully after several years of unusually low losses. Discover’s loan-loss rate in February topped 3%. It was the first time in five years that Discover's monthly charge-offs hit that level.