Notice2021-21567
Consumer Credit Card Market Report of the Bureau of Consumer Financial Protection, 2021
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Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
October 4, 2021
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Bureau of Consumer Financial Protection (Bureau) is issuing its fifth biennial Consumer Credit Card Market Report to Congress. The report reviews developments in this consumer market since the Bureau's most recent biennial report on the same subject in 2019.
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<title>Federal Register, Volume 86 Issue 189 (Monday, October 4, 2021)</title>
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[Federal Register Volume 86, Number 189 (Monday, October 4, 2021)]
[Notices]
[Pages 54681-54684]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21567]
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BUREAU OF CONSUMER FINANCIAL PROTECTION
Consumer Credit Card Market Report of the Bureau of Consumer
Financial Protection, 2021
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Consumer Credit Card Market Report of the Bureau of Consumer
Financial Protection Bureau.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is
issuing its fifth biennial Consumer Credit Card Market Report to
Congress. The report reviews developments in this consumer market since
the Bureau's most recent biennial report on the same subject in 2019.
DATES: The Bureau released the 2021 Consumer Credit Card Market Report
on its website on September 29, 2021.
FOR FURTHER INFORMATION CONTACT: Wei Zhang, Credit Card Program
Manager, Division of Research, Markets & Regulations
(<a href="/cdn-cgi/l/email-protection#7b0c1e125501131a151c3b181d0b19551c140d"><span class="__cf_email__" data-cfemail="e99e8c80c7938188878ea98a8f998bc78e869f">[email protected]</span></a>), or Margaret Seikel, Financial Analyst, Division
of Research, Markets & Regulations (<a href="/cdn-cgi/l/email-protection#701d110217110215045e0315191b151c30131600125e171f06"><span class="__cf_email__" data-cfemail="610c001306001304154f1204080a040d21020711034f060e17">[email protected]</span></a>). If you
require this document in an alternative electronic format, please
contact <a href="/cdn-cgi/l/email-protection#91d2d7c1d3ced0f2f2f4e2e2f8f3f8fdf8e5e8d1f2f7e1f3bff6fee7"><span class="__cf_email__" data-cfemail="2f6c697f6d706e4c4c4a5c5c464d4643465b566f4c495f4d01484059">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
Message From David Uejio, Acting Director
Credit cards are one of the most commonly-held and widely-used
financial products in America--over 175 million Americans hold at least
one credit card. During the COVID-19 pandemic, credit cards played a
vital role as both a source of credit in emergencies and a payment
method as more transactions occurred online.
As the fifth biennial report to Congress on the credit card market,
this report details how swift actions by both the public and private
sectors likely impacted how many consumers used their credit cards and
managed their debts during the pandemic. To address hardships caused by
COVID-19, the Federal government provided consumers direct relief by
issuing a series of economic impact payments, providing enhanced
unemployment benefits, suspending student loan payments and interest
accrual for federally held loans, offering mortgage forbearance, and
enacting a moratorium on evictions. At the same time, credit card
issuers provided voluntary relief to consumers by offering payment
deferral and fee waivers.
Supported by these efforts, this report finds that the decline in
credit card debt
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during the pandemic was unprecedented in speed and magnitude. Measures
of consumer stress, such as late payment incidence and the share of
accounts delinquent, hit record lows.
This report also highlights areas in the credit card market that
may entail risks for consumers such as system deficiencies related to
implementing relief programs and automatic payment processes. The
Bureau continues to monitor indicators of credit card use, cost, and
availability to identify potential for consumer harm, as well as study
the impact of new, innovative products.
Our credit card market report is intended to present the latest
research on this vital market to consumers, issuers, and policymakers.
As many consumers, particularly those with non-prime credit scores,
still face numerous hardships due to COVID-19, this report remains
critical. The Bureau will carry out its mission in ensuring this market
continues to benefit all participants during these times of heightened
uncertainty.
1. Consumer Credit Card Market Report of the Bureau of Consumer
Financial Protection, 2021
Credit cards are central to the financial lives of over 175 million
American consumers. Over the last few years and through 2019, the
credit card market, the largest U.S. consumer lending market measured
by number of users, continued to grow in almost all measures until
suddenly reversing course in March 2020. Despite macroeconomic shocks
to the financial system, credit card market conditions remain
relatively stable at the time of this report writing, with that
stability likely supported by robust fiscal measures, lower consumer
discretionary spending, and voluntary industry relief programs.
The COVID-19 pandemic significantly impacted how many consumers
used and interacted with credit cards. Far fewer consumers applied for
new credit cards in 2020 than the year prior. During the pandemic,
existing cardholders paid off the highest share of their credit card
debt in recent years. Additionally, late payment and default rates fell
to historic lows, most notably for consumers with below-prime scores.
At the same time, credit cards continued to play a vital role as
both a payment method and source of credit. Consumers still used their
cards to facilitate transactions, smooth consumption, and earn rewards.
As physical stores closed and a greater share of commerce was
transacted digitally, cardholders benefited from the consumer
protections afforded to credit cards such as limitations on liability
and enhanced security.
In response to pandemic-related hardship, issuers provided a
considerable number of payment deferrals and fee waivers to their
cardholders in 2020. However, consumers calling their credit card
issuers often faced long wait times to access these relief programs.
Additionally, complaints submitted to the Bureau regarding credit cards
spiked in the second quarter of 2020 and remained elevated throughout
the year.\1\ Overall reported satisfaction with credit cards issuers
fell significantly during the pandemic but remained higher than post-
Great Recession levels.\2\ Despite these indicators of lower consumer
satisfaction, credit card issuers continue to generate profitable
annual returns consistent with historic levels relative to other market
lending activities even with an initial decline during the first half
of 2020.\3\
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\1\ Bureau of Consumer Fin. Prot., Consumer Response Annual
Report, at 39 (Mar. 2021), <a href="https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf">https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf</a>
Billing disputes remain the largest complaint category.
\2\ See Press Release, J.D. Power, Customers Losing Faith in
Credit Card Issuers as COVID-19 Pandemic Lingers, J.D. Power Finds
(Aug. 20, 2020), <a href="https://www.jdpower.com/business/press-releases/2020-us-credit-card-satisfaction-study">https://www.jdpower.com/business/press-releases/2020-us-credit-card-satisfaction-study</a>.
\3\ Bd. of Governors for the Fed. Rsrv. Sys., Report to the
Congress on the Profitability of Credit Card Operations of
Depository Institutions (July 2021), <a href="https://www.federalreserve.gov/publications/files/ccprofit2021.pdf">https://www.federalreserve.gov/publications/files/ccprofit2021.pdf</a>.
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In 2019 and 2020, innovation continued to reshape the credit card
market for both users and providers. New providers, including large and
small financial institutions as well as startup and mainstream
technology companies have entered--or are in the process of entering--
the market with competing products, features, and methods for issuing
credit cards.\4\
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\4\ Reference in this report to any specific commercial product,
service, firm, or corporation name is for the information and
convenience of the public and does not constitute endorsement or
recommendation by the Bureau.
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1.1 Background
In 2009, Congress passed the Credit Card Accountability
Responsibility and Disclosure Act (CARD Act or Act).\5\ The Act made
substantial changes to the credit card market. The CARD Act mandated
new disclosures and underwriting standards, curbed certain fees, and
restricted interest rate increases on existing balances. Among the CARD
Act's many provisions was a requirement that the Board of Governors of
the Federal Reserve System (Board) report every two years on the state
of the consumer credit card market. With the passage of the Dodd-Frank
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in
2010, that requirement transferred to the Bureau of Consumer Financial
Protection (Bureau) alongside broader responsibility for administering
most of the CARD Act's provisions. This is the fifth report published
pursuant to that obligation, building on prior reports published by the
Bureau in 2013, 2015, 2017, and 2019.\6\
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\5\ The Act superseded a number of earlier regulations that had
been finalized, but had not yet become effective, by the Office of
Thrift Supervision (OTS), the National Credit Union Administration
(NCUA), and the Board of Governors of the Federal Reserve System.
Those earlier rules were announced in December of 2008 and published
in the Federal Register the following month. See 74 FR 5244 (Jan.
29, 2009); 74 FR 5498 (Jan. 29, 2009). The rules were withdrawn in
light of the CARD Act. See 75 FR 7657, 75 FR 7925 (Feb. 22, 2010).
\6\ See Bureau of Consumer Fin. Prot., Card Act Report (Oct. 1,
2013) (2013 Report), <a href="http://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf">http://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf</a>; Bureau of Consumer Fin. Prot., The
Consumer Credit Card Market (Dec. 2015) (2015 Report), <a href="http://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf">http://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf</a>; Bureau of Consumer Fin. Prot., The Consumer Credit
Card Market (Dec. 2017) (2017 Report), <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf</a>; Consumer Fin. Prot., The Consumer Credit
Card Market (Aug. 2010) (2019 Report), <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.pdf</a>. The Bureau also held a conference in 2011 in
which numerous market stakeholders contributed information and
perspective on developments in the credit card market. See Press
Release, Bureau of Consumer Fin. Prot., CFPB Launches Public Inquiry
on the Impact of the Card Act (Dec. 19, 2012), <a href="https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-public-inquiry-on-the-impact-of-the-card-act">https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-public-inquiry-on-the-impact-of-the-card-act</a>.
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The CARD Act was enacted over ten years ago.\7\ Since its passage,
researchers, including the Bureau, have studied the effects of the CARD
Act on the cost and availability of credit to consumers. This year the
Bureau conducted a review of rules implementing the Act per section 610
of the Regulatory Flexibility Act,\8\ and the Bureau expects to release
its determination this fall.
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\7\ Credit Card Accountability Responsibility and Disclosure Act
of 2009, Public Law 111-24, 123 Stat. 1734 (2009).
\8\ Public Law 96-354, 94 Stat. 1164 (1980) (5 U.S.C. 601 et
seq.).
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1.2 Publication
In addition to being delivered to Congress, the full report is
available to the public on the Bureau's website at <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf</a>.
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1.3 Summary of Report
The full 2021 report reviews the state of the consumer credit card
market as of the end of 2020. In addition to mandating the Bureau's
biennial review and report on the market, the Act also requires the
Bureau to ``solicit comment from consumers, credit card issuers, and
other interested parties'' in connection with its review.\9\ As in past
years, the Bureau has done so through a Request for Information (RFI)
published in the Federal Register, and the Bureau discusses specific
evidence or arguments provided by commenters throughout the report.\10\
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\9\ 15 U.S.C. 1616(b) (2012).
\10\ Request for Information Regarding Consumer Credit Card
Market, 85 FR 53299 (Aug. 28, 2020).
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This report continues the approach of the Bureau's previous
reports. The Bureau revisits similar baseline indicators to track key
market developments and trends. It also revisits some in-depth topics
to assess how the market has changed. For example, the current report
updates the deferred interest analysis last conducted in the 2017
Report. The Bureau also discusses the effects of COVID-19 throughout
the report and specifically adds a section about its impact on credit
card issuers and their responses to consumers' needs.
Below is a summary of the core findings from each section of the
report:
<bullet> Total outstanding credit card balances continued to grow
and peaked in 2019 at $926 billion, but, by the second quarter of 2020,
consumers reduced card balances to $811 billion, the largest six-month
reduction in U.S. history. At the end of 2020, debt crept back up to
$825 billion. The share of accounts with a revolving balance declined
in 2020, and more consumers paid down their card debt in 2020.
Utilization rates declined across credit score tiers, and the share of
consumers with below-prime scores who used 90 percent or more of their
general purpose credit line fell to record lows. A declining share of
consumers were late in making their payments as of the second quarter
of 2020.
<bullet> The total cost of credit (TCC) on revolving accounts
continued to increase through 2019 but declined modestly in 2020. The
2020 declines in TCC for general purpose and private label cards were
0.8 and 1.5 percentage points, respectively. Recent TCC decreases are
largely a result of decreases in the indices underlying variable rates,
such as the prime rate, and lower overall fees assessed. The Bureau
estimates that the five rate decreases by the Federal Reserve from
early-2019 through 2020 led to a cumulative roughly $18 billion that
credit card borrowers did not pay over that period. Accounts held by
consumers with deep subprime credit scores saw the greatest drop in
fee-to-balance ratios in 2020.
<bullet> Most measures of credit card availability decreased in
2020 after continued growth since the Great Recession. Application
volume for credit cards decreased sharply in 2020 from its peak level
in 2019, likely due to the interaction between reduced acquisition
efforts by issuers and a decline in consumer demand. Approval rates
also declined modestly in 2020. Driven by these contractions in both
supply and demand, annual growth in the number of credit card accounts
opened and the amount of credit line on new accounts reached its lowest
level since 2013. Total credit line across all consumer credit cards
fell slightly in 2020 from a post-Great Recession high of over $4.5
trillion in 2019 but remained above 2018 levels. Existing accounts held
by consumers with subprime and deep subprime scores saw the greatest
constriction in available line.\11\ While credit line decrease (CLD)
incidence increased for consumers with below-prime credit scores,
issuers did not substantially deviate from previous line management
trends during the pandemic.
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\11\ These trends of constricting credit availability do not
appear to continue in 2021. See Corinne Candilis & Ryan Sandler,
Credit card limits are rising for most groups after stagnating
during the pandemic, Bureau of Consumer Fin. Prot. (Aug. 11, 2021),
<a href="https://www.consumerfinance.gov/about-us/blog/credit-card-limits-rising-for-most-groups-after-stagnating-during-pandemic/">https://www.consumerfinance.gov/about-us/blog/credit-card-limits-rising-for-most-groups-after-stagnating-during-pandemic/</a>.
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<bullet> Digital engagement is growing consistently across all age
groups and nearly every platform type. The share of consumers electing
to receive statements digitally (e-statements) rather than by mail is
continuing to increase, though the pace of adoption tapered in 2020. E-
statement adoption has been surpassed by mobile app adoption as a
method to engage with issuers.
<bullet> Many consumers received some form of relief on their
credit card debts from their credit card providers during the pandemic.
The Bureau estimates that over 25 million consumer credit card accounts
representing approximately $68 billion in outstanding credit card debt
entered relief programs in 2020, figures vastly higher than in prior
years. The Bureau also estimates that surveyed issuers' cardholders
were able to forgo principal payments of anywhere from $0.5 billion to
$1.5 billion against their credit card debts in 2020 due to these
relief programs. Entries into payment deferral relief were spread
fairly evenly across credit score tiers, but accounts held by consumers
with lower scores received payment deferrals at the highest rate.
<bullet> Since the 2019 Report, issuers have lowered the range of
their daily limits on debt collection phone calls for delinquent credit
card accounts while increasing the use of emails in collection.
However, survey respondents reported that, on average, only 31.9
percent of accounts that received email clicked open their emails.
<bullet> Innovations aimed at expanding credit access, particularly
for less creditworthy borrowers, continued to grow in both the number
of offerings and users. Buy Now, Pay Later (BNPL) products are offering
a new form of purchasing with payments spread out over time, typically
in four installments. Credit card issuers are offering similar plans,
providing consumers more ways to manage their cash flow.
1.4 Current and Future Bureau Work in This Market
Over the past two years, the Bureau has been actively engaged in
the credit card market and is taking measures to address regulatory
uncertainty, identify compliance deficiencies as well as research new
emerging technologies and products to ensure the adequacy of consumer
protection and a transparent and competitive marketplace for all
consumers. The Bureau is continuing to study and consider actions to
address the areas of concerns noted in the full report, but for reasons
described in the full report, the Bureau is not proposing additional
new or revised regulations at this moment, beyond the current and
future Bureau work described here and in the full report.
<bullet> In June of 2020, the Bureau released a Notice of Proposed
Rulemaking (NPRM) concerning the anticipated discontinuation of
LIBOR,\12\ including proposing examples of replacement indices that
satisfy Regulation Z requirements.\13\ As proposed, the rule would
allow credit card issuers to replace the LIBOR index used in setting
variable rates on many existing accounts with a replacement index
before LIBOR becomes unavailable, if certain conditions were met. To
the Bureau's knowledge, there are millions of
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consumer credit card accounts indexed on LIBOR. The proposed rulemaking
should help credit card providers transition those affected accounts to
a replacement index in an orderly manner. The Bureau expects to issue a
final rule in January 2022.\14\
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\12\ Press Release, Bureau of Consumer Fin. Prot., CFPB Takes
Steps to Facilitate LIBOR Transition (Jun. 4, 2020), <a href="https://www.consumerfinance.gov/about-us/newsroom/cfpb-facilitates-libor-transition/">https://www.consumerfinance.gov/about-us/newsroom/cfpb-facilitates-libor-transition/</a>.
\13\ 85 FR 36938 (Jun. 18, 2020), <a href="https://www.govinfo.gov/content/pkg/FR-2020-06-18/pdf/2020-12239.pdf">https://www.govinfo.gov/content/pkg/FR-2020-06-18/pdf/2020-12239.pdf</a>.
\14\ Office of Info. & Regulatory Affairs, Amendments to
Regulation Z to Facilitate Transition From LIBOR (2021), <a href="https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=3170-AB01">https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=3170-AB01</a>.
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<bullet> Through the Prioritized Assessments conducted in May of
2020, the Bureau found that credit card issuers generally provided some
form of relief to consumers experiencing hardships as a result of
COVID-19, such as ``skip-a-pay'' or payment deferrals for one to six
months, with or without interest accrual.\15\ Other relief options
included lowered interest rates, waivers of annual and other fees, and
extended deferred interest periods for credit card accounts that had
already received deferred interest. However, the Bureau also identified
certain issues that may raise the risk of consumer harm such as system
deficiencies related to implementing relief programs and automatic
payment processes, as well as delays in timely delivery of certain
disclosures and responding to billing disputes.
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\15\ Bureau of Consumer Fin. Prot., Supervisory Highlights
COVID-19 Prioritized Assessments Special Edition, Issue 23 (Jan.
2021), <a href="https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-23_2021-01.pdf">https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-23_2021-01.pdf</a>.
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<bullet> The Bureau continues to monitor the expansion of credit
access, especially when new and innovative technologies are used.
Credit access expansion can be positive but should be done responsibly
and in a way that is understandable to consumers. Consumers will be
better served if the use of such technologies are clearly explained in
case of adverse actions.\16\ Forms of point-of-sale financing, such as
BNPL products, offer not only convenience but a new way of financing
for many consumers. The Bureau encourages all providers in this space
to take steps to make sure users of these products are adequately
informed of the risks of such products.
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\16\ Bureau of Consumer Fin. Prot., Tech Sprint on Electronic
Disclosures of Adverse Action Notices (Oct. 2020), <a href="https://www.consumerfinance.gov/rules-policy/innovation/cfpb-tech-sprints/electronic-disclosures-tech-sprint/">https://www.consumerfinance.gov/rules-policy/innovation/cfpb-tech-sprints/electronic-disclosures-tech-sprint/</a>.
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<bullet> The Bureau encourages study into the effects of certain
lending practices and their impact on credit scores, particularly for
those consumers with non-prime credit scores. Practices such as credit
line decreases (CLD) and account closure not only reduce consumers'
access to credit but also potentially inflate their credit utilization
rate. This could adversely affect consumers' credit scores without any
other changes in their behavior. Additionally, over the past decade, a
declining share of credit card issuers reported information on a
borrower's actual payment amount to nationwide consumer reporting
agencies, which may have implications for consumer access to credit.
<bullet> As indicated in its January 28, 2021 announcement,\17\ the
Bureau intends to take bold and swift action on racial equity in
financial services, including in the areas of credit card marketing and
lending. Existing data available to the Bureau do not allow the Bureau
to fully examine the disparity in use, cost, and availability of credit
cards by racial groups. The Bureau intends to explore options to
incorporate racial data in its data sources to inform its future work.
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\17\ Bureau of Consumer Fin. Prot., The Bureau is taking much-
needed action to protect consumers, particularly the most
economically vulnerable (Jan. 28, 2021), <a href="https://www.consumerfinance.gov/about-us/blog/the-bureau-is-taking-much-needed-action-to-protect-consumers-particularly-the-most-economically-vulnerable/">https://www.consumerfinance.gov/about-us/blog/the-bureau-is-taking-much-needed-action-to-protect-consumers-particularly-the-most-economically-vulnerable/</a>.
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<bullet> As described in the new technical specifications issued on
August 20, 2021, the Bureau's ``Collect'' website will be the mandatory
vehicle issuers must use to submit credit card agreements and their
associated data in 2022 and beyond. Not only does Collect provide a
simplified submission process and robust audit trail for issuers, it
will allow the Bureau and other organizations to expand their current
research on credit card agreements.\18\
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\18\ Bureau of Consumer Fin. Prot., Technical Specifications for
Credit Card Agreement and Data Submission Required under TILA and
the CARD Act (Regulation Z) (Aug. 20, 2021), <a href="https://files.consumerfinance.gov/f/documents/cfpb_tech-specs-credit-card-agreement-data-submissions_final-rule_2021-08.pdf">https://files.consumerfinance.gov/f/documents/cfpb_tech-specs-credit-card-agreement-data-submissions_final-rule_2021-08.pdf</a>.
David Uejio,
Acting Director, Bureau of Consumer Financial Protection.
[FR Doc. 2021-21567 Filed 10-1-21; 8:45 am]
BILLING CODE 4810-AM-P
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