Fed Blames Consumers For Higher Lending Losses

A surge in the number of big spenders in the U.S., not zealous marketing of credit cards by banks, is fueling rising consumer lending losses, a New York Federal Reserve report said.

In the last few years, the heaviestspending demographic group - people 25 to 54 years old - has surged in the U.S., and household debt levels have reached the highest point since the late 1950s, the study said.

As a result, more Americans are defaulting on their credit card bills, forcing U.S. banks to write off - or charge off - almost 5 percent of credit card loans last year, up from an average 3.8 percent in 1983.

“Rising demand for credit is driving up the debt burden for Americans,” said Donald Morgan, an economist at the New York Fed who coauthored the study. “That’s making it riskier to lend.”

The study debunks claims by some analysts and consumer advocates that over-zealous credit card marketing is behind record numbers of consumers who fall behind on loan payments or file for personal bankruptcy to escape their debts.

Though banks haven’t helped consumers by flooding the U.S. with tens of millions of credit cards in the last three years, the real driver has been a thirst to borrow by Americans, the Fed study said.