Geico Credit Cards: Buffett's 'Painful Confession'

Warren Buffett — legendary investor and world’s second-richest person — brought himself down a slight notch, financially and humility-wise, thanks to the failed idea of a credit card for customers of Geico, the insurance stalwart owned by his Berkshire Hathaway. Buffett admitted to Berkshire shareholders in his annual letter that his brainchild of a credit card branded to the third-largest U.S. car insurer, which Berkshire acquired in 1996, was a bad idea.

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Credit Card Charge-Offs Still Troubling

Credit card charge-offs – or loans deemed uncollectible and written off – edged mostly upward in January as reported by the major card issuers, although there is some optimism in the stabilizing of delinquency rates. Delinquencies – accounts running 30 days late – is generally a harbinger of bad loans to come. Most of the major card issuers either reported modest decreases or little change in the delinquency rates for January compared with December.

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Hefty 'Debt Relief' Fees Await Credit Card Over-Users

The beginning of a new year marks the arrival of the first post-holiday credit card statements and the realization for many that they may need to turn to debt relief companies for help. But consumers groups are warning credit card users that so-called debt consolidation plans could leave you with more debt – in the form of fees that can run as high as $4,000 for total debt of about $20,000 in the first half of a debt settlement agreement. In many debt settlement plans, consumers make monthly payments, usually into a special bank account, until “there is enough to make a lump-sum settlement offer to their creditors,” according to ConsumersUnion.org, the prominent non-profit organization which publishes Consumer Reports. The debt settlement companies, however, immediately start taking their fees out of this account.

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Wall Street Wary of Credit Card Reform’s Impact

Despite a mostly positive group of earnings reports this week from the biggest credit card-issuing companies, forecasts of possible profit trouble ahead as card reform laws take affect are rattling Wall Street. Particularly worrisome to investors – which sent shares of American Express and Capital One tumbling Friday – were an analyst’s forecast and comments from executives at American Express and Capital One. “The lack of consumer demand for credit, across our businesses, is striking,” said Capital One Chief Executive Richard Fairbank.

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American Express Profits Soar; Credit Costs Plunge

Bolstered by a plunge in expenses for futures losses, American Express reported net income of $716 million, or 60 cents a share, up from $240 million, or 21 cents a share, in the same quarter a year earlier. The earnings performance was buoyed by a significant cut in provisions for loan losses – $748 million, down 47 percent compared to $1.4 billion in the year-ago period. The decline reflected continued improvement in credit quality during the latter part of 2009.

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Bank of America Sees 'Stabilization' in Credit Losses

Bank of America, the nation’s top lender and second-largest credit card issuer, reported a $5.2 billion loss, or 60 cents per share, for the fourth quarter, including its repayment to the government bailout program, compared to a loss of $2.4 billion a year earlier. But the bank sees a glimmer of hope in the “stabilization” of credit losses. Net charge-offs saw the first decline – compared to a previous quarter – in nearly four years.

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FTC to Review Practices of Major Debt Buyers, Collectors

The Federal Trade Commission will review the practices of the nation’s top debt buyers, who often hire the debt collectors that are drawing complaints from consumers. When the debt-buying companies hire debt collectors, or assume the role on their own, mistakes are made that result in “debt collectors frequently try to collect from the wrong consumers or the wrong amounts, or both,” the FTC said.

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Discover's Credit Card Defaults Up, 4Q Profit Down

Discover Financial Services, issuer of the Discover cards, today reported a 16 percent drop in profit for its fourth quarter, with climbing credit card defaults playing a part in its bottom line. Discover – the sixth-largest credit card issuer – reported net income of $371, or 63 cents a share, for its fourth quarter ended Nov. 30, down 16 percent from $444 million, or 89 cents a share, in the same period last year.

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American Express Outrivals Rest in Defaults, Late Pays

American Express outshined credit card competitors in November with declines in defaults and late payments – reaching new lows for the year in those two vital categories. AmEx – the top credit card provider based on purchase volume – said defaults slipped to 7.6 percent in November, from 7.8 percent the previous month, the seventh consecutive monthly drop.

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