It's the kind of story that many wrestling with credit card debt can only dream of.
JP Morgan Chase has forgiven the credit card balances for all its Canadian customers. The bank stopped issuing new Canadian cards in March 2018 and recently decided to cancel the outstanding debts, presumably because it was uneconomical to pursue collections.
The bank has not disclosed the total value of the write off, but several Canadians have spoken to press about having balances as large as $6,000 cancelled.
While this is a good news story for many Canadian consumers, it tells an interesting story about legacy bank processes, technology, and culture.
Firstly, one of the largest and most sophisticated banks in the world is unable to run a profitable credit card service without massive scale. This is true of many areas of financial services and there are countless stories of successful fintech start-ups who used technology to win niche business from incumbent banks that found it too hard or costly to serve well.
The decision to forgive this debt rather than sell it off may represent a more significant cultural shift. Chase could easily have sold out to a debt collection company, but this carries some reputational risk if the collectors are too aggressive and consumers feel hounded. Are banks waking up to the new generation of consumer-friendly fintech companies and adjusting their behavior accordingly?
Credit card rewards expert Patrick Sojka said Chase likely concluded that debt forgiveness was ultimately cheaper than continuing to collect credit card payments in Canada. "They're still probably paying taxes, paying accountants, and for them, they just probably worked it out and [said], 'Let's just forgive the debt and fully get out of the country.'"