[co-author: Dominyka Plukaite]
On September 29, the Consumer Financial Protection Bureau (CFPB) published its biennial report in Congress regarding the climate of consumer credit cards. The report shows that the market growth in recent years has reversed in 2020. It also provides the latest research findings on the use of consumer credit, its cost, and consumers’ access to credit, and highlights a few other important findings:
- From a peak of $ 926 billion in 2019, credit card debt fell to $ 811 billion in the second quarter of 2020, the largest drop in six months, before reaching $ 825 billion at the end of the year ;
- More than 25 million consumer credit card accounts, representing $ 68 billion in outstanding credit card debt, entered relief programs in 2020 – numbers significantly higher than in previous years;
- The volume of credit card applications declined significantly in 2020 from its record highs in 2019, with credit card application approval rates also declining;
- Late payments and default rates have fallen to historically low levels, mainly for consumers with below-average scores;
- Consumers with lower premium scores saw the greatest limitations on available credit, even as the use of that line of credit declined;
- Digital engagement – in the form of consumers signing up for electronic billing statements, online banking, electronic payment of credit card bills, signing up for mobile apps, and more. and
- Credit lenders continued to make fewer calls to collect debts, but increased the use of email in collection efforts.
During the pandemic, many credit card holders received some form of federal assistance, in the form of improved unemployment benefits, suspension of payments and interest on federal student loans, and more. Likewise, credit card lenders have provided relief through payment deferrals and fee waivers. “While public and private programs have helped consumers reduce their credit card debt during the pandemic, we at CFPB will ensure that families and those still struggling get the help they need.” , said Dave Uejio, acting director of CFPB. âAcross the credit card market, consumers were seeking and using less credit, paying off debt and lowering late payment rates to historically low levels. At the end of the pandemic relief efforts, the CFPB will use all of our tools to support a fair recovery. “
The report further highlights several specific areas that the CFPB wishes to focus on in the immediate future to promote fair consumer financial recovery, including the failure of issuers to report payment amounts to credit bureaus and the practices of issuers. concerning reductions in lines of credit. The CFPB also intends to increase its use of demographic data in its future research.
Our catch. The CFPB report tracks our expectations on credit cards due to the pandemic. With Rohit Chopra confirmed as new CFPB director, as we discussed here, we expect surveillance and enforcement action to increase. Chopra had an active career with the Federal Trade Commission, focusing on financial services. So all businesses, not just credit card issuers, should be proactive in their compliance efforts.