Credit Card Default Rate at Bank of America (NYSE:BAC) 13 Percent Higher than Major Competitors

With losses in the Bank of America (NYSE:BAC) credit card division reaching an enormous $4.5 billion at the end of the first nine months of 2009, new CEO Brian Moynihan has his work cut out for him to turn things around in that unit of the company, among many others.

A large number of analysts in the banking industry attribute the credit card problems at Bank of America to being far too ambitious in their bid to become the No. 1 credit card company in the country, and so there were a lot of decisions at the underwriting level which brought the disaster they are now experiencing in that division.

Obviously many people shouldn’t have been awarded credit cards, or at minimum, had a number of limits in place to keep them from overextending themselves. That wasn’t the case, and now Bank of America is paying the price.

The one positive out of this for the company is Brian Moynihan does have a firm grasp of the issue, as he was responsible for that unit since he was named president of the consumer and small business banking divisions of the company in August.

Fortunately he wasn’t the person running things in the credit card division which brought the debacle to fruition, so shareholders can at least feel good about that aspect of things going forward.

In early November after having time to assess the credit card problems at Bank of America, Moynihan stated that there were far too many credit cards issued to their customers.

With the credit card push, the implementation of their “Teller Score,” which allowed a teller to immediately offer a pre-approved credit card to the customer on the spot, was a major part of the problem in 2009.

While the company has no thought of ending that program, they have changed it to include a secondary step, whereby the teller won’t be the one to close the deal, but rather a ‘personal banker’ somewhere else in the branch who the customer would then talk more in-depth about the potential credit card.

Another problem which caused lingering problems in the credit card unit was the slow response of Bank of America to respond to users who were delinquent. Instead of lowering credit lines to those customers, they left them in place to be accessed while still being delinquent.

Bank of America is only behind JPMorgan Chase (NYSE:JPM) in issuing credit cards in the United States.