Here is another example from the list of “things that we saw coming, but nobody cared.” Credit card companies are suffering from record default rates. In the fourth quarter of 2008, credit card companies charged off—declared as uncollectible—a whopping 6.3 percent of their debt. Aside from a fluke spike in the data in the first quarter of 2002, this was the largest charge-off rate since the Federal Reserve began collecting these data in 1980.
Interestingly, these record setting losses for credit card lenders come after the punitive changes to the bankruptcy code were supposed to weed out the “deadbeat” borrowers and lead to lower default rates. Apparently, things did not work out as planned.
Read more here.