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Credit problems concern FDIC, Fed

Consumers are failing to pay credit-card bills on time and filing bankruptcy in greater numbers, and federal regulators say their conduct could hurt U.S. banks.

In testimony before a U.S. House subcommittee, Ricki Helfer, chairman of the Federal Deposit Insurance Corp., called the developments "dark spots on the U.S. banking industry's otherwise very bright picture."

For now, Helfer doesn't think these trends threaten the financial health of the nation's banks. But the FDIC is monitoring them and conducting special quarterly checkups of banks that specialize in credit-card lending, she said.

Many of the nation's biggest banks recently have reported rises in credit-card delinquencies.

Federal Reserve Gov. Janet Yellen told the panel that the Fed, too, is worried about the deterioration of consumers' finances. The Fed _ the nation's central bank _ has found increased evidence of consumers using credit cards to pay daily expenses.

But Yellen, like Helfer, remains confident in the health of the banking system.

For one thing, credit-card operations remain quite profitable for banks, she said. For another, a recent Fed survey found that banks are tightening their credit-card loan standards in response to recent developments.

Two banks with big shares of Florida's market _ NationsBank Corp. and First Union Corp., both in Charlotte, N.C. _ have recently done precisely that.

Analysts cite rising delinquencies on credit cards and home mortgages as evidence that many people may be overextended. And they say the bulge in consumer debt may be a reason why retail sales rose only slightly in the second week of July compared with the same week last year.

A lack of clearance sales at department stores, which traditionally occur in July in preparation for the back-to-school season, also may have contributed.

A year earlier, sales were helped by a heat wave, which triggered demand for air conditioners and fans.

Earlier this month, the Fed reported consumer borrowing increased by a smaller-than-expected $4.7-billion in May, down from a revised $6.7-billion rise in April.

_ Times staff writer Tim Gray contributed to this report.