New Credit Card Rules to Have Little Impact on ABS
U.S. credit card Asset-backed securities trusts are well positioned to offset performance repercussions from changes to U.S. credit card regulations that went into effect on February 22, according to Fitch Ratings. However, credit card companies are set to face more acute pressures.
The impact on card performance variables will be felt most noticeably in gross yield, which will decrease slightly in the short to medium term, Fitch says in its latest Credit Card Movers and Shakers report. The resulting implications for performance measures are not likely to precipitate any rating actions for credit card ABS, Fitch says.
U.S. prime credit card chargeoffs rebounded almost to the near-record levels set last fall, according to the latest Credit Card Index results from Fitch.
Fitch’s prime credit card chargeoff index jumped 112 bps (11%) to 11.37%. The results, which cover the January collection period, pushed the index to its highest level since September 2009’s record 11.52%, and 54% above year-earlier levels. The increase was largely driven by a payment holiday for Chase credit cardholders, which pushed more chargeoffs into the current period.
Meanwhile, TransUnion reported that during the fourth quarter of 2009 the Credit Risk Index (CRI) indicated that risk conditions in the U.S. are beginning to moderate. The Credit Risk Index is a statistic developed to measure the changes in average consumer credit risk within various geographies across the nation.
During the fourth quarter of 2009, TransUnion’s Credit Risk Index increased nationally 38 basis points to 129.67 from 129.29 in the third quarter, the smallest increase of this measure since the early stages of the current recession.
Based upon the Credit Risk Index it appears that we may have possibly reached a plateau for credit risk after five consecutive quarters of significant increases, suggesting that the financial recovery is beginning to take hold as consumers continue to adapt their lifestyle and debt management practices to navigate these difficult economic times.
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