Major credit-card issuers in the U.S. start mitigating the customer spending limits. This is because COVID-19 has snatched jobs from many Americans and consequently, they are facing problems keeping up on loans.
Discover Financial Services became the largest lender and it has started obstructing the credit card limit for new customers. A conference meeting was arranged on late Wednesday. The company said that they are expecting to take a big hit from programs by letting the existing customers or borrowers delay the growth of interest or skip payments due to the present COVID-19 situation.
Lets see what Discover Financial Services has to say. “As the number of loans enrolled in these programs increases, our financial results will be adversely impacted in the short term due to forgone interest.”
They made this announcement a day after the card-issuing company, Synchrony Financial said that they would try to impede losses by managing the existing customer’s account very closely. Well, this is the company that issues credit-cards for Gap Inc. American Eagle Outfitters Inc. and J.C. Penny Co. The situation has changed altogether after the outbreak of COVID-19.
Brian Wenzel, Chief Financial Officer said in a conference call that the company has started using its own information as well as data from credit bureaus. This is being done so that they can dynamically reevaluate the creditworthiness of the customers. This means that some are allowed to spend more whereas some cannot.
The defensive moves from both these companies are playing an impactful role in the field of global payment. On 23rd April, Thursday, Roger Hochschild, the Chief Executive Officer of Discover Financial Services said on a conference call. He said that they are trying to diminish the risk. In this emergency situation they are trying to include certain things. These are setting lower limits for new accounts, additional verification of employment. The company is allowing fewer increases for some limited cardholders.
Hochschild also said in a separate interview, “As part of our credit response to COVID-19, we have not made any changes in terms of closing interactive accounts or doing more line deceases.” He also added, “We think it is very challenging to do those now in the time of COVID-19. Pulling away credit when they need it most can have tremendously adverse impacts”.
It is a fact that banks are gradually heading into a crisis with strong balance sheets. They have started rolling out the payment-deferral programs. It is believed that customers will surely catch up after this pandemic.
In addition to this, Discover has started ‘skip-a-payment’ program and they enrolled a half-million accounts into this program and it represents $3.6 billion in balances.