More consumers are paying their credit card bills on time than they have in nearly six years, one indication that the economy continues to buzz despite the Federal Reserve’s efforts to slow it down with interest rate hikes.
Still, economists say the Fed is not likely to raise rates at its policy meeting slated for this week to further brake growth .
“For the moment, they’re just watching,” said Diane Swonk, chief economist of Chicago-based Bank One Corp.
Swonk said a third-quarter resurgence in consumer spending and evidence of more bills being paid on time indicates that the Fed might act to raise rates early next year. Signs that consumers are able to repay their debt could offset concerns about levels of consumer debt.
The number of credit card bills paid late fell to 2.99 percent at the end of the second quarter from 3.33 percent a year earlier, according to seasonally adjusted figures from the American Bankers Association’s latest Consumer Credit Delinquency Bulletin.
Those are the lowest card delinquencies since late 1994.
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What’s more, late payments on home equity loans at banks have dropped to 1.06 percent, the lowest since the ABA began tracking such loans in 1983.
“It means that the consumer is far from dead,” Swonk said.
The bankers study found a spike in late payments on auto loans, but Swonk said that is more indicative of problems in that specific area than the economy in general.
Banks have been financing car loans to people with riskier credit histories, something lenders did earlier with credit card and home-equity loans, which already have had higher delinquencies.
Cutting back: First Data Resources is closing its Elgin office, laying off about 65 workers who last year were casualties of job cutting at Bank One.
First Data, which does work for Bank One, agreed to hire the employees last year when Bank One consolidated its credit card operations following the acquisition of First Chicago NBD Corp. by the old Banc One Corp. More than 100 other Bank One employees were laid off in Elgin.
Now those Elgin employees will be let go, along with 940 other workers in a shakeup at First Data Resources, which is owned by Atlanta-based First Data Corp.
“We are strategically repositioning the company in a way that promotes innovation and enables us to be more competitive,” said Charlie Fote, president and chief operating officer of First Data Corp.
The former Bank One employees will receive severance based on their tenure at the bank and at First Data, according to First Data spokeswoman Nancy Etheredge. The company did not disclose details of the severance packages.
Thomas Kelly, a Bank One spokesman, said, “It’s unfortunate whenever someone’s job is eliminated and it’s good that their tenure at Bank One is being included.”
Branching out: Amicus, a bank that has no branches outside Cicero, is expanding into Colorado and California, where regulators recently said the bank will be allowed to open 25 offices in Safeway supermarkets.
Amicus was acquired in April 2000 by Canadian Imperial Bank of Commerce, which changed the Cicero bank’s name from St. Anthony Bank.
CIBC, which has $170 billion in assets, bought $32 million-asset Amicus as a springboard to move into Safeway stores, said Amicus President Steven Henley.
“We bought the bank to go along with our partnership with Safeway, which is headquartered in California,” he said.
So why not buy a bank in California?
“The one in Chicago was for sale,” Henley said.
Bank News: Veronica West of Northfield has become president of Financial Women International in Arlington, Va., one of the country’s oldest organizations for female financial executives. West, a 22-year Chicago banking veteran, now runs Collective Resources Inc., a management consulting and training firm that specializes in financial services.
Howard Savings Bank in Glenview recently received a “needs to improve” evaluation for its performance under the Community Reinvestment Act, according to the Federal Deposit Insurance Corp. The federal law requires banks to serve low- and moderate-income areas.