Notice2023-24132
Consumer Credit Card Market Report, 2023
Primary source
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
November 2, 2023
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (CFPB or Bureau) is issuing its sixth biennial Consumer Credit Card Market Report to Congress. The report reviews developments in this consumer market since the CFPB's most recent biennial report on the same subject in 2021.
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 211 (Thursday, November 2, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 211 (Thursday, November 2, 2023)]
[Notices]
[Pages 75277-75279]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-24132]
=======================================================================
-----------------------------------------------------------------------
CONSUMER FINANCIAL PROTECTION BUREAU
Consumer Credit Card Market Report, 2023
AGENCY: Consumer Financial Protection Bureau.
[[Page 75278]]
ACTION: Consumer credit card market report.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (CFPB or Bureau) is
issuing its sixth biennial Consumer Credit Card Market Report to
Congress. The report reviews developments in this consumer market since
the CFPB's most recent biennial report on the same subject in 2021.
DATES: The CFPB released the 2023 Consumer Credit Card Market Report on
its website on October 25, 2023.
FOR FURTHER INFORMATION CONTACT: Wei Zhang, Deputy Assistant Director,
Consumer Credit, Payments, and Deposits Markets, Division of Research,
Monitoring, and Regulations at ((202) 435-7700 or <a href="/cdn-cgi/l/email-protection#4631232f683c2e272821062520362468212930"><span class="__cf_email__" data-cfemail="a6d1c3cf88dccec7c8c1e6c5c0d6c488c1c9d0">[email protected]</span></a>),
or Margaret Seikel, Financial Analyst, Division of Research,
Monitoring, and Regulations (<a href="/cdn-cgi/l/email-protection#afc2ceddc8ceddcadb81dccac6c4cac3efccc9dfcd81c8c0d9"><span class="__cf_email__" data-cfemail="a7cac6d5c0c6d5c2d389d4c2ceccc2cbe7c4c1d7c589c0c8d1">[email protected]</span></a>). If you require
this document in an alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#dc9f9a8c9e839dbfbfb9afafb5beb5b0b5a8a59cbfbaacbef2bbb3aa"><span class="__cf_email__" data-cfemail="70333620322f3113131503031912191c19040930131600125e171f06">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
1.1 Background
In 2009, Congress passed the Credit Card Accountability
Responsibility and Disclosure Act of 2009 (CARD Act or Act).\1\ 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 CFPB alongside
broader responsibility for administering most of the CARD Act's
provisions. This is the sixth report published pursuant to that
obligation, building on prior reports published by the CFPB in 2013,
2015, 2017, 2019, and 2021.\2\
---------------------------------------------------------------------------
\1\ 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
(Board). 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).
\2\ See CFPB, 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>;
CFPB, The Consumer Credit Card Market (Dec. 2015) (2015 Report),
<a href="https://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf">https://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf</a>; CFPB, 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>; CFPB, The Consumer
Credit Card Market (Aug. 2019) (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>; CFPB, The Consumer Credit Card Market (Sept.
2021) (2021 Report), <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>. 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>.
---------------------------------------------------------------------------
1.2 Publication
In addition to being delivered to Congress, the full report is
available to the public on the CFPB's website at <a href="https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf">https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf</a>.
1.3 Summary of Report
The full 2023 report reviews the state of the consumer credit card
market as of the end of 2022. In addition to mandating the CFPB's
biennial review and report on the market, the Act also requires the
CFPB to ``solicit comment from consumers, credit card issuers, and
other interested parties'' in connection with its review.\3\ As in past
years, the CFPB has done so through a Request for Information (RFI)
published in the Federal Register, and the CFPB discusses specific
evidence or arguments provided by commenters throughout the report.\4\
---------------------------------------------------------------------------
\3\ 15 U.S.C. 1616(b) (2012).
\4\ RFI Regarding Consumer Credit Card Market, 88 FR 5313 (Jan.
27, 2022).
---------------------------------------------------------------------------
This study represents the CFPB's sixth biennial report on the state
of the consumer credit card market and continues the approach of the
CFPB's previous reports. The CFPB revisits similar baseline indicators
to track key market developments and consumer risks as well as the
adequacy of consumer protections. Throughout this report, we continue
to examine trends by card type and credit score tier, but further
segment consumers with the highest scores into two new groups, prime
plus (720 to 799) and superprime (800 and above). In a new section,
this report examines the market dynamics, concentration, and
profitability of the credit card industry in detail, complementing
other regulators' examination of the safety and soundness of card
issuers. We explore new topics that have become more important as the
market continues to evolve. For example, the current report explores
the prevalence and cost of installment plan features and the dollar
value of credit card rewards. Additionally, we discuss issuer practices
related to dispute resolution, minimum payments, and servicemember rate
reductions.
Use of Credit
<bullet> Use of credit: Credit card debt at the end of 2022
surpassed $1 trillion for the first time in our data, but total
outstandings remain below pre-pandemic levels when adjusted for
inflation. Spending grew to new highs of $846 billion in the fourth
quarter of 2022. At the same time, total payments rose, and cardholders
paid significantly more of their monthly balances with a greater share
of accounts entirely paid off each month. Delinquency and charge-off
rates in 2022 were at lower levels than 2019 but increasing, presumably
rising with the expiration of COVID-19 related financial relief.
<bullet> Overall market size and structure: Nearly 4,000 issuers,
together with dozens of co-brand merchant partners and four major
networks, provide cards to over 190 million consumers. The top ten
credit card issuers still represent over four-fifths of consumer credit
card loans, but the next 20 biggest issuers' market share has grown
since 2016.
<bullet> Competition and profitability: For companies involved in
credit card issuance, servicing, and debt collection, the industry
remains profitable. Issuers' profitability fell in 2020 but spiked in
2021 and remained at or above 2019-levels in 2022 with an average
return on assets of six percent for general purpose cards and two
percent on private label portfolios. Point-of-sale; Buy Now, Pay Later
(BNPL); and fintech personal loans as well as ``pay-by-bank'' options
increasingly compete with traditional credit cards for purchase volume
and balances.
<bullet> Cost of credit: By some measures, credit cards have never
been this expensive, as issuers charged more than $130 billion in
interest and fees in 2022 alone. By the end of 2022, interest and fees
as an annualized percentage of balances, or the total cost of credit,
was almost 18 percent on general purpose cards and over 21 percent on
private label accounts. Many cardholders with subprime scores are now
paying 30 to 40 cents in interest and fees per dollar borrowed each
year. Federal Reserve rate increases triggered upward repricing on most
general purpose cards, and issuers continue to price well above the
prime rate, with an average annual percentage rate (APR) margin of 15.4
percentage points. Fee volume now exceeds pre-pandemic levels. Annual
[[Page 75279]]
fees grew in 2021 and 2022, while late fees returned to 2019 levels at
$14.5 billion as did the cardholder cost of balance transfers and cash
advances.
<bullet> Rewards: The dollar value of rewards earned by general
purpose cardholders exceeded $40 billion for mass market issuers in
2022. Transacting accounts, or those where the cardholder pays the full
statement balance each month, are increasingly benefitting from credit
card use. But, when a consumer revolves a balance on their credit card,
the cost of interest and fees almost always exceeds the value of
rewards the consumer may have earned. Cardholders' rewards redemptions
have increased, but consumers still forfeit hundreds of millions of
dollars in rewards value each year.
<bullet> New features and products: Installment plan features which
permit cardholders to convert a credit card purchase to a lower-cost,
fixed-rate loan comprise a small but growing segment of the market
designed to compete with BNPL. These issuer plans often offer lower
finance charges than on revolving debt, but consumers may struggle to
make higher monthly payments. ``Credit card-as-a-service'' platforms
from fintechs to traditional banks have streamlined co-brand
partnerships to improve user experience and offer novel rewards with
smaller retailers. Some issuers are now approving consumers with only
soft inquires on consumers' credit reports; others are underwriting
consumers without credit scores using new datasets and modeling
techniques outside the traditional credit reporting system. Issuers are
providing cardholders with more flexible repayment terms and new
payment options, including through a growing number of digital wallets.
<bullet> Persistent debt: With the average minimum payment due
increasing to over $100 on revolving general purpose accounts in 2022,
more users are incurring late fees and facing higher costs on growing
debt. We find one in ten general purpose accounts are charged more in
interest and fees than they pay toward the principal each year,
indicating a pattern of persistent indebtedness that could become
increasingly difficult for some consumers to escape. Public relief
programs in 2020 and 2021 enabled some consumers to pay down credit
card balances, but the number of cardholders facing persistent debt has
begun to climb.
<bullet> Availability of credit: Most measures of credit card
availability grew in 2021 and 2022 after a sharp decrease in access
during 2020. Application volume for general purpose credit cards
reached a new peak in 2022, as issuers increased acquisition efforts
and consumer demand grew. For retail cards, in contrast, application
volume fell from 2020 to 2022. Approval rates more than rebounded for
all card types. The recent upticks in marketing, applications, and
approvals led to significant growth in credit card originations in 2021
with even more activity in 2022. Consumers with below-prime scores
opened more than 80 million new credit card accounts in 2021 and 2022
combined compared to 63 million over the two year period from 2019
through 2020. Total credit line across all consumer credit cards
increased to over $5 trillion in 2022 but remained below 2017 levels in
real terms. After declining in 2020, issuers initiated credit line
increases more frequently in 2021 and 2022 than they did prior to the
pandemic but decreased lines or closed accounts at rates similar to
those seen over the past decade.
<bullet> Disputes: Credit card disputes spiked with pandemic-
related cancellations and supply chain issues in mid-2020, declined in
2021, but then rose in 2022 as spending grew. Disputed transaction
volume for mass market issuers was up 50 percent from 2019 levels to
almost $10 billion in 2022, and chargebacks increased more than 80
percent from $3.2 billion to $5.9 billion.
<bullet> Account servicing: Cardholders increasingly use and
service their cards through digital portals, including those accessed
via mobile devices. Three in four general purpose accountholders are
now enrolled in issuers' mobile apps, and adoption is increasing,
notably for those under 65. The use of automatic payments has likewise
continued to climb. New artificial intelligence (AI)/machine learning
(ML) technologies are changing how providers service accounts, but
concerns regarding the use and sharing of consumer data remain
significant, particularly among older cardholders.
<bullet> Debt collection: Compared to prior surveys, the use of
email in collections continued to increase in 2022, with consumers
opening about one-third of messages. Issuers seemed to leverage the
text messaging (or SMS) channel significantly more in 2022 than in
prior years with a relatively low opt-out rate at 1.3 percent. New
enrollments in loss mitigation programs and total inventory in those
programs declined. Post-charge-off settlements fell significantly from
their previous peaks during the pandemic. All issuers who sold debt
reported deleting the charged-off tradelines from credit reports upon
sale, potentially resulting in an incomplete view of consumers' debt
burden, likelihood of default, and history in the credit reporting
system.
Throughout this report, we highlight potential areas of concern in
the consumer credit card market. Given rising balances and credit
costs, more cardholders may struggle to pay their credit card bill on
time, especially with amounts past-due, overlimit, or under an
installment plan added to the minimum payment due. As such, the CFPB
will continue to monitor assessments of late fees, reliance upon
penalty repricing, and debt collection practices, alongside the
disclosure of minimum payments in accordance with CARD Act
requirements. Issuers' margins are increasing as they price APRs
further above the prime rate, potentially signaling a lack of price
competition. Instead, companies offer more generous rewards and sign-up
bonuses to win new accounts, largely benefitting those with higher
scores who pay their balances in full each month. The CFPB will explore
ways to promote comparison shopping on purchase APRs--a major cost of
credit cards that is often unknown to consumers prior to card issuance.
We will also monitor changes in rewards value if issuers look to cut
costs in response to lower revenue. We encourage new entrants--both
bank and non-bank--to work on providing consumers with more
transparency, better experiences, and greater access to credit, so long
as they comply with existing consumer finance laws.
1.4 Current and Future CFPB Work in This Market
Over the past two years, the CFPB has been actively engaged in the
credit card market and has taken measures to address regulatory
uncertainty, identify compliance deficiencies, and research new,
emerging technologies and products to ensure the adequacy of consumer
protection and a transparent and competitive marketplace for all
consumers. The CFPB is continuing to study and consider actions to
address the areas of concern noted in the full report. Aside from a
current rulemaking related to credit card penalty fees, however, the
CFPB is not currently proposing to add or revise regulations related to
the topics covered in the 2023 Consumer Credit Card Market Report.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2023-24132 Filed 11-1-23; 8:45 am]
BILLING CODE 4810-AM-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on November 2, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.