Advertisement
 

American Express pays some customers to close accounts

February 24, 2009|Bloomberg News

American Express Co. is paying some cardholders $300 each to close accounts so the lender can reduce the risk of defaults as the recession deepens.

People who got the offer to "simplify" their finances must pay off their entire credit card balance by April 30, according to New York-based American Express.

Enrolling in the program cancels a customer's account and may lead to the forfeiture of reward points or rebates, the company said.

"What AmEx is trying to do is move to the front of the line in terms of getting paid back" by customers who owe debts to multiple lenders, said Michael Taiano, an analyst at Sandler O'Neill & Partners. "They clearly grew loans faster than their competitors in the years leading up to this financial crisis."

Chief Executive Kenneth Chenault is shedding customers as rivals reduce credit lines, raise interest rates and cut back on mail solicitations to brace for future losses. The industry's defaults are set to break records and may reach 11% by year-end.

Consumers have fallen behind on credit card payments as U.S. unemployment reached 7.6% last month, the highest rate since 1992.

Charge-offs, or loans that American Express has deemed uncollectable, rose to 8.29% in January from 7% the month before, while payments that were at least 30 days overdue climbed to 5.28% from 4.86%, the company said last week in a filing for debt packaged into securities.

American Express, which received $3.39 billion from the U.S. Treasury to boost its capital, said last month that fourth-quarter profit from continuing operations fell 72% to $238 million as more consumers defaulted.

Advertisement
Los Angeles Times Articles
|
|
|