The Past-Due Loan Problem at American Express

Right now the Dow Jones Industrial Average is down 86.16 points, and American Express is down $1.51 per share. Given that the DJIA divisor is 0.123017848, that means American Express is responsible for 12.27 points of the Dow's 86-point fall, or something over 14%.

But why is American Express doing so badly, and dragging down the Dow so much? The proximate cause seems to be a downgrade by UBS analyst Eric Wasserstrom, who's worried about credit losses.

I can confirm that these might well be a problem. For the past few weeks, I've been annoyed by phone calls from American Express; when I answer them, I'm told by an automated voice that someone who may or may not have used my phone number in the past needs to call them back urgently. Today, I finally got around to calling the number given, to see if I could take my number off their list. And what did I find?

"Thank you for continuing to hold. Your call is very important to us and will be answered by the next available representative."

In the end, I was on hold for about four minutes before I started talking to a human. And this is the line that American Express devotes to people they desperately want to hear from, and who presumably owe them significant amounts of money.

The way I see it, one of two things is going on here. Either American Express has more or less given up on collecting its past-due credit-card loans, and is making only the most desultory attempts to reach out to its debtors, relying on automated phone messages and understaffed call centers. Alternatively, Amex really does care about reaching these people, but there are so many past-due debtors that the credit card issuer's systems have become overwhelmed.

Either way, I have sympathy with Eric Wasserstrom.

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