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Something to think about while shopping…

images7.jpegOver the holidays, the Associated Press reported on just how serious delinquent credit card debt had become. Here’s a snippet:

The value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the AP…At the same time, defaults — when lenders essentially give up hope of ever being repaid and write off the debt — rose 18 percent to almost $961 million in October, according to filings made by the trusts with the Securities and Exchange Commission.

What interested me here was not the growing problem (though of course that’s important), but the fact that this sort of data was publicly available in SEC filings — something I wasn’t aware of since I don’t tend to spend much time looking at exhibits to 10-Ds, like this one that was filed last week by BA Master Credit Card Trust II, a Bank of America (BAC) entity. That filing was for the month ended Nov. 30, which means that it’s before people really went wild on their credit cards. But the fact that delinquencies equal 5.53% of the portfolio, or $5.18 billion dollars is pretty shocking, especially when you compare it to the exhibit to the 10-D filed a year earlier which showed just over $4 billion in delinquent balances. The big growth, judging by these two filings, has been in delinquencies between 60 and 89 days.

But why stop at credit cards, since just like sub-prime mortgages, it’s just another product that’s been sliced and diced? A quick skim of recent 10-Ds turns up this fascinating exhibit filed last week by BMW Vehicle Lease Trust 2007-1. Because this is a relatively new trust, there’s not enough history to go back a year. But going back one month shows a small, but potentially dangerous trend: at the end of October, there was only 1 loan in this trust that was 90 days or more late. But by the end of November, that had risen to 30. Granted, it’s a small number, but it’s still a 30-fold increase from one month to the next. And it’s presumably in a segment of the economy that’s about as far removed from sub-prime mortgages as you can get.