U.S. Card Issuers Eye Unlikely Group: New Bankrupts

By James B. Kelleher, Reuters

A record number of Americans filed to wipe out their debts this year ahead of the autumn implementation of a tough new bankruptcy law. That surge in filings forced U.S. credit-card issuers like Citigroup and Capital One Financial to report a huge jump in uncollectable debts in the third quarter and to warn the losses would bleed into the fourth quarter.

The bankruptcy bubble has forced the card issuers to set aside big amounts to cover the unprecedented surge in charge-offs. It’s also forcing them to scramble to rebuild their diminished loan portfolios, which are already under stress because of new federal guidelines on minimum payments requirements that are cutting into receivables and interest income, according to analysts at Citigroup Global Markets.

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