Gloom-and-doom economists who have portended the imminent collapse of the American consumer (we don't want to name names) might have a reason to put off their calls for a downturn of epic proportions just a little bit longer. Because at a time when the American consumer is already leveraged to the hilt, and when credit data suggests some are finally biting the bullet and curbing spending to pay it down, lenders have hit on a novel strategy to boost growth.
And that strategy is, according to Bloomberg, raising certain borrowers' credit limits without a request from the borrower. In other words, some consumers are waking up to notices or emails from their credit-card lenders informing them that their credit limits have just been raised - sometimes by a wide margin.
Capital One CEO Richard Fairbank told BBG that the company's resistance to unsolicited credit-limit hikes is a "radical theology" because it goes above and beyond post-crisis safeguards. But now that lenders are being pressed to keep showing revenue growth at a time of record excess, Capital One has changed its mind with the explicit goal of trying to convince consumers to borrow more that they can afford to pay back - or at least not all at once.
Of course, while debt-fueled spending registers as growth in the all-important consumption metrics, there will eventually come a time when they debt must either be repaid, or written off.
"It's like putting a sandwich in front of me and I haven't eaten all day," said D'Ante Jones, a 27-year-old rapper known as D. Maivia in Houston who was close to hitting the ceiling on his Chase Freedom card when JPMorgan Chase & Co. nearly doubled his spending limit a year ago without consulting him. He soon borrowed much more. "How can I not take a bite out of it?"