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KAI RYSSDAL: Just in case you were unsure, here’s another sign the American consumer’s falling further behind. Target said in filings with the Securities and Exchange Commission this week that it’s had to write off a chunk of its outstanding credit-card debt. Bad news for one of the country’s biggest retailers. Worse for cardholders who’re discovering they can’t pay what they owe. Marketplace’s Jeff Tyler reports.
JEFF TYLER: Consumers are getting squeezed as prices for gas and food move higher. As a result, more and more Americans are cutting back on payments to their credit-card companies.
And the rate at which consumers are falling behind seems to be accelerating. The amount of loans Target wrote off last month rose 2 percent over the previous month.
David Light is managing editor of Consumer Bankruptcy News. He says the credit-card issuers are left with few options.
DAVID LIGHT: So they’re being forced to eat it, really. They’re forced to walk away from more than they’ve been walking away from. The figures for the fourth quarter of 2007 shows that they walked away from over $5 billion.
Target is one of those companies stuck with a lot of deadbeats. Scott Hoyt with Moody’s Economy.com says Target is one of the few retailers to remain in the credit-card business.
Scott Hoyt: A lot of major retailers have sold off their portfolios, and actually I think Target’s under pressure to do the same thing. But right now, they’re probably one of the few large ones that still owns their portfolio.
Target has been trying to sell about half of its credit-card loans for around $4 billion. But Hoyt says it’s a tough market.
Hoyt: It’s particularly difficult to finance purchases of debt right now with everything that’s going on in the financial markets. So, yeah, it’s a difficult time to be a seller.
JPMorgan Chase is rumored to be interested in Target’s loan business. But this latest write-down news could cause the bank or any potential buyer to negotiate for a cheaper price.
I’m Jeff Tyler for Marketplace.
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