Credit card losses continue to get worse. Card issuer Capital One (COF) said in an SEC filing this morning that its annualized charge-offs hit 9.41% in May, which is up 10% from an 8.56% rate in April.
Worse, as noted by Reuters, is that the rate of deterioration would have been worse had it not been for an accounting change.
Here’s the note from the SEC filing:
A change in bankruptcy processing resulted in an improvement in the U.S. Card charge-off rate that is reflected in the May results. The impact was approximately 50 basis points. While our internal guidelines require bankrupt accounts to be charged off within 30 days, our practice had been to charge off customer accounts within 2 to 3 days of receiving notification of bankruptcy. Due in part to an increase in the volume of bankruptcies, we have extended our processing window to improve the efficiency and accuracy of bankruptcy-related charge-off recognition. The new process remains within Capital One’s internal guidelines, as well as FFIEC guidelines that bankrupt accounts must be charged-off within 60 days of notification.