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MasterCard Says Consumer Spending ‘Freefall’ Abated (Update3) - Bloomberg.com
MasterCard Says Consumer Spending ‘Freefall’ Abated By Hugh Son June 4 (Bloomberg) -- MasterCard Inc., the world’s second- biggest electronic payments network, said the “freefall” in U.S. retail spending has abated amid an increase in consumer confidence. While spending is still dropping, the rate of decline slowed, said Chris McWilton, president of MasterCard’s U.S. markets, durin......

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MasterCard Says Consumer Spending ‘Freefall’ Abated

By Hugh Son

June 4 (Bloomberg) -- MasterCard Inc., the world’s second- biggest electronic payments network, said the “freefall” in U.S. retail spending has abated amid an increase in consumer confidence.

While spending is still dropping, the rate of decline slowed, said Chris McWilton, president of MasterCard’s U.S. markets, during an investor conference today. He cited unpublished data from the company’s SpendingPulse survey that will be released later this month.

“The recovery is showing signs of life,” McWilton said at the conference, sponsored by KBW Inc., adding that consumer confidence is improving. Any rebound is likely to take a long time and card issuers still face a “staggering amount of credit losses,” he said.

MasterCard runs systems that handle consumer credit and debit-card payments, providing economists and traders an early look at spending patterns before government data are released. McWilton said the Purchase, New York-based company sees signs that overdue payments may be stabilizing. Analysts are predicting credit-card defaults will set records at more than 10 percent before the recession ends.

The rate of U.S. credit-card accounts that were at least 60 days overdue dropped in April for the first time this year, by 7 basis points to 4.37 percent, which may lead to lower charge- offs in coming months, Fitch Ratings analysts led by Michael Dean said today in a statement.

Unemployment

The unemployment rate, typically a leading indicator for credit-card defaults, probably hasn’t peaked and may reach 14 percent in some “Rust Belt” industrial states, he said.

“The consumer is still somewhat cautious,” he said. “We did see a bump in the most recent consumer confidence index, so there is a light at the end of the tunnel.”

New U.S. credit-card rules will help reverse a “systemic lack of trust” in the industry caused by “deceptive” practices, McWilton said. The rules passed by Congress and signed by President Barack Obama will affect every aspect of how card issuers market themselves, he said.

McWilton said he heard Obama call card practices unfair and deceptive at a meeting with industry executives. While some of the new rules went too far, the president accurately described some of the industry’s tactics, McWilton said.

The company rose 89 cents to $168.40 at 4:09 p.m. in New York Stock Exchange composite trading. The shares have gained 18 percent this year.

MasterCard lost more than half of a $59 billion portfolio of former Washington Mutual Inc. debit-card users to rival Visa Inc. because the lender failed last year, triggering the takeover of the Seattle-based firm’s assets, McWilton said.

“If WaMu hadn’t gotten involved as heavily as they had in the subprime mess and weren’t taken over into receivership by the federal government, we would still have Washington Mutual as a very strong and well-served and happy debit customer,” McWilton said.

To contact the reporter on this story: Hugh Son in New York at hson1@bloomberg.net


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