A study by Cardhub.com of Federal Reserve data found that last year, while banks wrote off a total of $75 billion in credit card debt, the level of the debt only declined by around $67 billion. This, according to Cardhub, suggests that the “entire decrease [in overall debt] is the direct result of Americans defaulting on their debt.”
As noted in a new Mercator Research Note to clients, a recent New York Fed Analysis of their consumer credit panel data recently concluded that real declines in consumer borrowing have occurred beyond charge-offs, a conclusion supported by consumer surveys, including Mercator’s CustomerMonitor surveys. It is also worth noting that charged-off consumers have also deleveraged—involuntarily—and that many will find it difficult to re-establish their credit going forward.
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