DOCSLIB.ORG

2015 Report on the Consumer Credit Card Market

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
2015 Report on the Consumer Credit Card Market December 2015 The Consumer Credit Card Market Message from Richard Cordray Director of the CFPB Credit cards are unique consumer financial products. Other products offer credit or provide a means to make payment. Credit cards do both. With that unique profile, they serve as the means by which Americans spend trillions of dollars every year and revolve hundreds of billions of dollars in balances every month. It is critical, therefore, that the Bureau does its part to help ensure this vital market is fair, transparent, and efficient. In 2009, after the onset of the Great Recession, Congress passed the Credit Card Accountability Responsibility and Disclosure Act of 2009. Congress took this step before it turned to reforming financial services markets more broadly with the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010. In the midst of one of the greatest financial and economic crises to confront our nation, Congress made sure that addressing this particular market was a top priority. It is not hard to understand why Congress made this choice. The pre-2009 credit card market was one in which huge numbers of consumers were at needless risk due in large part to inconsistent billing practices, pricing changes, and the proliferation of back-end fees, among other issues. This picture changed dramatically in the wake of the CARD Act. Pricing became more transparent upfront. Fees and interest fell as a share of balances. And the Act’s discernable impacts on credit availability were ones that Congress intended—like restrictions on issuing cards to consumers without the ability to make payments. 2 CONSUMER FINANCIAL PROTECTION BUREAU – CONSUMER CREDIT CARD MARKET REPORT This report details how over the last few years, conditions for consumers have either remained stable or further improved—even as credit card companies have been able to achieve significant rates of return in line with historic norms. The view expressed by Congress in 2009—that smart and thoughtful guardrails could bring positive change to this market that would benefit all participants—has been thoroughly ratified. The report, however, also highlights areas of the market that still create risks to consumers. Deferred interest products offer significant benefit to some consumers. But as the main surviving exception to the general shift towards upfront and transparent credit card pricing, they impose significant costs on many consumers. In addition, the total cost of credit on cards issued by subprime specialist credit card companies is significantly higher than on cards offered by their mass market competitors, even after controlling for consumers’ credit risk. And for consumers who have struggled to pay their bills, the debt collection market remains challenging and intimidating. More broadly, this is also a market in rapid flux. The entire credit card lifecycle is moving online. Consumers increasingly use digital channels to apply for cards, to manage their accounts, and to make payments. Rewards programs have gone from commonplace to ubiquitous. Major security innovations are underway. Digital technology is bringing new forms of competition to an already competitive market. The Bureau intends to monitor the market carefully as these developments unfold. Even as technology changes, our mission remains constant. Our biennial credit card market report is intended to bring a foundation of common knowledge and insight into this critical and complex market. That foundation will enable consumers and their advocates, industry participants, and regulators alike to move forward toward our common goal of better serving the needs of consumers. Sincerely, Richard Cordray 3 CONSUMER FINANCIAL PROTECTION BUREAU – CONSUMER CREDIT CARD MARKET REPORT Table of contents Message from Richard Cordray ................................................................................. 2 Table of contents......................................................................................................... 4 Executive summary ..................................................................................................... 7 1. Introduction ......................................................................................................... 20 1.1 Review mandate ...................................................................................... 20 1.2 Scope and methodology .......................................................................... 21 1.3 Limitations .............................................................................................. 27 2. Consumer credit card use ................................................................................. 28 2.1 Market size .............................................................................................. 28 2.2 Card holdings .......................................................................................... 36 2.3 Card payment behavior........................................................................... 45 2.4 Credit score changes over time ............................................................... 53 2.5 Delinquency and charge-off rates ........................................................... 55 3. Cost of credit....................................................................................................... 59 3.1 Fees . ....................................................................................................... 60 3.2 Interest rates ........................................................................................... 72 3.3 Total cost of credit .................................................................................. 76 4 CONSUMER FINANCIAL PROTECTION BUREAU – CONSUMER CREDIT CARD MARKET REPORT 3.4 Comparative costs ................................................................................... 80 3.5 Variable APRs ......................................................................................... 82 3.6 Conclusion and areas for future study .................................................... 84 4. Availability of credit ............................................................................................ 85 4.1 New accounts .......................................................................................... 86 4.2 Credit lines ............................................................................................ 106 5. Credit card issuer practices............................................................................. 119 5.1 Cardholder agreement readability ......................................................... 119 5.2 Issuer pricing and disclosure practices ................................................ 124 5.3 Online access to account information and disclosures ........................ 133 5.4 Open credit score initiative ................................................................... 136 5.5 Ability to pay practices .......................................................................... 139 6. Deferred interest promotions .......................................................................... 147 6.1 Product use ........................................................................................... 154 6.2 Payoff rates ............................................................................................ 162 6.3 Repeat use ............................................................................................. 180 6.4 Multiple balances .................................................................................. 185 6.5 Post-promotion costs ............................................................................ 194 6.6 Ability to pay ......................................................................................... 204 6.7 Availability of alternatives .................................................................... 206 7. Credit card rewards .......................................................................................... 208 7.1 Overview................................................................................................ 209 7.2 Rewards practices ................................................................................. 226 8. Credit card debt collection .............................................................................. 237 5 CONSUMER FINANCIAL PROTECTION BUREAU – CONSUMER CREDIT CARD MARKET REPORT 8.1 Definitions ............................................................................................. 238 8.2 Debt collection markets ........................................................................ 239 8.3 Debt collection and recovery practices generally ................................. 243 8.4 Survey findings ..................................................................................... 247 9. Product innovation ........................................................................................... 263 9.1 Security innovations ............................................................................. 264 9.2 Mobile payments ................................................................................... 277 9.3 New competitors ................................................................................... 283 Appendices .............................................................................................................. 289 Appendix A: Additional figures ..................................................................... 289 Appendix B: CARD Act timeline
Load more

Recommended publications
  • Eftpos Payments Australia Limited ABN 37 136 180 366
    eftpos Payments Australia Limited ABN 37 136 180 366 Parliamentary Joint Committee on Corporations and Financial Services: Inquiry into Mobile Payment and Digital Wallet Financial Services. PO Box 6100 Parliament House Canberra ACT 2600 [Via email: [email protected]] Dear Committee Members, Thank you for the opportunity to provide a further submission to this important inquiry. eftpos is a mutual style corporation that is not motivated by profit and promotes choice and competition in the Australian market. As the only Australian-owned separately designated payments system, eftpos is an essential part of the national payments infrastructure and is committed to providing efficient, safe, cost-effective and market- specific payments solutions for the benefit of all Australians. The Company’s Purpose is simple – to do good for Australia. To that end, eftpos believes it can greatly assist the Australian finance sector and broader economy to thrive and grow by providing low cost access to our network and payments capability over our national, real time processing infrastructure. Further, low cost access, mobile payments capability, our ability to issue tokens, and the work we are doing with industry around real time digital payments and a ubiquitous Digital Identity solution, have the potential to bring many FinTech solutions to life in the current environment, particularly through mobile payments. eftpos has invested deeply in the mobile ecosystem, having purchased Beem It, the Australian payments App that enables consumers to send and receive money using their phone in seconds, in November 2020 to help diversify the eftpos Group business and move further into the digital ecosystem.
    [Show full text]
  • Assessing the Cost & Benefits of Credit Card
    Loyola Consumer Law Review Volume 25 | Issue 1 Article 3 2012 Assessing the Cost & Benefits of Credit Card Rewards: A Response to Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations Steven Semeraro Prof. Thomas Jefferson School of Law Follow this and additional works at: http://lawecommons.luc.edu/lclr Part of the Consumer Protection Law Commons Recommended Citation Steven Semeraro Assessing the Cost & Benefits of rC edit Card Rewards: A Response to Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations, 25 Loy. Consumer L. Rev. 30 (2012). Available at: http://lawecommons.luc.edu/lclr/vol25/iss1/3 This Feature Article is brought to you for free and open access by LAW eCommons. It has been accepted for inclusion in Loyola Consumer Law Review by an authorized administrator of LAW eCommons. For more information, please contact [email protected]. Semeraro Article (Do Not Delete) 11/29/2012 12:27 PM ASSESSING THE COSTS & BENEFITS OF CREDIT CARD REWARDS: A RESPONSE TO WHO GAINS AND WHO LOSES FROM CREDIT CARD PAYMENTS? THEORY AND CALIBRATIONS Steven Semeraro* or two decades, economic and legal academics have F speculated about the impact of the fees that merchants pay for credit card acceptance. Since all customers pay the same price, the theory goes, everyone pays for the benefits that go only to credit card users. A recent Federal Reserve Bank of Boston (FRBB) policy paper written by economists Scott Schuh, Oz Shy, and Joanna Stavins entitled Who Gains and Who Loses from Credit Card Payments? Theory and Calibrations1 has taken the argument a step further, contending that credit card programs reduce consumer welfare by transferring money from low-income households that purchase goods and services with payment * Professor of Law, Thomas Jefferson School of Law.
    [Show full text]
  • The Credit CARD Act of 2009: What Did Banks Do?
    No. 13-7 The Credit CARD Act of 2009: What Did Banks Do? Vikram Jambulapati and Joanna Stavins Abstract The Credit CARD Act of 2009 was intended to prevent practices in the credit card industry that lawmakers viewed as deceptive and abusive. Among other changes, the Act restricted issuers’ account closure policies, eliminated certain fees, and made it more difficult for issuers to change terms on credit card plans. Critics of the Act argued that because of the long lag between approval and implementation of the law, issuing banks would be able to take preemptive actions that might disadvantage cardholders before the law could take effect. Using credit bureau data as well as individual data from a survey of U.S. consumers, we test whether banks closed consumers’ credit card accounts or otherwise restricted access to credit just before the enactment of the CARD Act. Because the period prior to the enactment of the CARD Act coincided with the financial crisis and recession, causality in this case is particularly difficult to establish. We find evidence that a higher fraction of credit card accounts were closed following the Federal Reserve Board’s adoption of its credit card rules. However, we do not find evidence that banks closed credit card accounts or deteriorated terms of credit card plans at a higher rate between the time when the CARD Act was signed and when its provisions became law. JEL Codes: D14, D18, G28 When this paper was written Vikram Jambulapati was a research assistant at the Federal Reserve Bank of Boston. He is now a Ph.D.
    [Show full text]
  • VISA ® CREDIT CARD AGREEMENT In
    Date: Memorial Union Account Number: 2901 University Ave, Stop 8222 UNIVERSITY Member(s): FEDERAL CREDIT UNION Grand Forks, ND 58202-8222 VISA CREDIT CARD AGREEMENT In this Agreement the words "you" and "your" mean each and all of those who agree to be bound by this Agreement; "Card" means a VISA credit card and any duplicates, renewals, or substitutions the Credit Union issues to you; "Account" means your VISA credit card line of credit account with the Credit Union, and "Credit Union" means the Credit Union whose name appears on this Agreement or anyone to whom the Credit Union transfers this Agreement. 1. Using Your Account. If you are approved for an Account, the Credit Union will establish a line of credit for you and notify you of your credit limit. You agree that your credit limit is the maximum amount (purchases, cash advances, finance charges, plus "other charges") that you will have outstanding on your Account at anytime. Each payment you make to your Account will restore your credit limit by the amount of the payment, unless you are over your credit limit. If you are over your credit limit, you must pay the amount you are over before payments will begin to restore your credit limit. You may request an increase in your credit limit only by a method acceptable to the Credit Union. The Credit Union has the right to reduce your credit limit, refuse to make an advance and/or terminate your Account at any time for any reason not prohibited by law. 2. Using the VISA Classic Card.
    [Show full text]
  • Securestar1.Pdf
    discover the peace of mind that you will experience when choosing the protection provided by our SECURESTAR® program. protection that helps prevent loss due to check fraud including altered and counterfeited checks. With our SECURESTAR® line of products, we make it practical and affordable to protect every at-risk document issued by your financial institution. The Problem... CHECK FRAUD LOSS security features; each designed COUNTERFEITED CHECKS Check fraud loss in the u.S. continues to help in the fight against fraud: Check counterfeiting consists of year after year. This trend has been • Prismatic Backgrounds copying a valid check, without attributed to criminals having access • Padlock Icon authority or right, with the intent to to easy-to-use and affordable • Warning Band and Warning Backer deceive or defraud. The counterfeit technology such as personal • Microprint Signature Line check can be drawn on a legitimate computers, high-resolution scanners • High Resolution Border account or presented along with and laser printers to create realistic • Thermochromic Ink false identification. To protect fraudulent checks. They also use • Full Chemical Reactivity against counterfeit check fraud, chemical erasures to alter the checks • Invisible Fibers financial institutions may: and phony I.d.s to pass them. • Holographic Foil • Use a positive pay or reverse • Genuine Watermark in Paper positive pay program The best defense financial institutions • Holograms • Thoroughly review customer and commercial businesses can take • Toner-Fusing Paper
    [Show full text]
  • Consumer Credit Cards: Product Guide Choose the Card That’S Right for You
    Consumer Credit Cards: Product Guide Choose The Card That’s Right For You. I’M INTERESTED IN: Earn 5% Cash Back In Two Categories You Choose 5% cash back on your first $2,000 in combined eligible purchases each quarter on two categories you choose1, such as: ® • TV, Internet & Streaming Services Choose where Visa Max Redeem you earn the • Home Utilities Cash Preferred • Cash Back2 most cash back Card • Cell Phone Providers EARNING 2% unlimited cash back on one everyday category of your choice: VALUABLE • Gas Stations & Ground Transportation REWARD • Restaurants & Food Delivery • Grocery Stores & Grocery Delivery 1% unlimited cash back on all other eligible purchases Earn Redeem Earn rewards Visa® Real • Merchandise on everyday Rewards – With No Limits • Gift Cards purchases Rewards Card 1.5X • 1.5X Points per $1 spent on eligible purchases3 • Travel • Cash Back Save interest ® Transfer Balances PAYING DOWN on balance Visa Low Intro Rate • BALANCES transfers Platinum Card • For an extended time From other higher rate and purchases credit cards Redeem ® Easy to manage Visa College 1.5X Unlimited Rewards • Merchandise card for college Real Rewards • 1.5X Points per $1 spent on eligible purchases3 • Gift Cards students Card • Account Alerts, Online and Mobile Account Access, • Travel BUILDING OR Autopay, Free Credit Score4 • Cash Back REBUILDING 5 CREDIT Access to credit Enjoy while helping ® • Online Account Access Visa The Convenience Of A Credit Card you build • Account Alerts Secured Card • While working to build or improve your credit a positive • Automatic Bill Pay credit history • Free Credit Score4 PGC764 VA 12/2020 Charts represent example spend/earn.
    [Show full text]
  • Credit Card Disclosure (PDF)
    OPEN-END CONSUMER CREDIT AGREEMENTS AND TRUTH IN LENDING DISCLOSURES Effective July 1, 2016 FEDERALLY INSURED BY NCUA PATELCO CREDIT UNION in agreements governing specific services you have and your general OPEN-END CONSUMER CREDIT AGREEMENTS AND membership agreements with Patelco, and you must have a satisfactory TRUTH IN LENDING DISCLOSURES loan, account and membership history with Patelco. MASTERCARD® CREDIT CARDS 2. On joint accounts, each borrower can borrow up to the full amount of SECURED MASTERCARD CREDIT CARD the credit limit without the other’s consent. PERSONAL LINE OF CREDIT 3. Advances Effective: JULY 1, 2016 a. Credit Card Advances: Credit Cards will be issued as instructed on This booklet contains agreements and Truth in Lending Disclosures your application. To make a purchase or get a cash advance, you that govern your use of the following Patelco Credit Union open-end can present the Card to a participating MasterCard plan merchant, consumer credit programs: to the Credit Union, or to another financial institution, and sign Pure MasterCard Payback Rewards World MasterCard the sales or cash advance draft imprinted with your Card number. Keep sales and cash advance drafts to reconcile your monthly Pure Secured MasterCard Passage Rewards World Elite MasterCard statements. You can also make purchases by giving your Card Points Rewards World MasterCard Personal Line of Credit number to a merchant by telephone, over the internet, or by other means, in which case your only record of the transaction may In addition to this booklet,
    [Show full text]
  • PREPAID CARD by MAIL with Any Purchase of $750 Or More Made with the Synchrony Bank Music Credit Card.1
    GET A $ PREPAID CARD BY MAIL with any purchase of $750 or more made with the Synchrony Bank Music credit card.1 Offer valid December 1 – December 31, 2017. Rebate form must be postmarked by January 31, 2018. Step 1: Make a single-receipt purchase with your Synchrony Bank Music credit card. Step 2: Complete this form, including mailing information and last 4 digits of the Synchrony credit card used. Name __________________________________________________________________________________________ Address ____________________________________________________________________________________ Last 4 digits of Synchrony credit card _________________________________________ City __________________________________________________________________________________________ Invoice # _____________________________________________________________________________________ State _______________________ Zip _______________________________________________________ Phone __________________________________________________________________________________________ Email (optional) _________________________________________________________________________ Step 3: Send a copy of your receipt, along with this completed form, to the address below. Music Credit Rebate Offer #5604 P.O. Box 7210 Mesa, AZ 85216 Please keep a copy of this rebate form and your original invoice for your records. Visit myrebatemanager.com or call 1-855-333-2820 to inquire about status. 1To be eligible to receive a rebate under this offer you must: (1) make a purchase of $750 or more on a single receipt from 12/01/2017 – 12/31/2017 with your Synchrony Bank Music credit card; (2) complete and submit a rebate form, together with a copy of the original receipt, that is postmarked by 1/31/2018. Cardholders who use their Synchrony Bank Music credit card for their qualifying purchase will be eligible to receive a $100 Visa Prepaid Card. Purchases with a Synchrony Bank Music credit card are subject to credit approval. One rebate per qualifying purchase valid at participating U.S. locations. See store for details.
    [Show full text]
  • Synchrony: a Growing Credit-Card Powerhouse As It Outpaces Its Competitors, the Private-Label Giant Is Poised to See Its Shares Spike Later This Year
    WSJ WSJ LIVE MARKETWATCH BARRON'S PORTFOLIO DJX MORE News, Quotes, Companies, Videos SEARCH ASIA EDITION U.S. EDITION Log In Subscribe HOME MAGAZINE DAILY INVESTING IDEAS TOP ADVISORS MARKET DATA PAID ADVISOR DIRECTORY FEATURE Synchrony: A Growing Credit-Card Powerhouse As it outpaces its competitors, the private-label giant is poised to see its shares spike later this year. Email Print 3 Comments Order Reprints By LAWRENCE C. STRAUSS February 20, 2016 Synchrony partners with 22 major retailers, including the names below, to issue private-label cards. The credit-card industry is facing head winds as major players duke it out for customers. But one part of the market isn’t getting enough credit: private-label cards, which typically are branded with one retailer and offer consumers perks that include discounts, loyalty rewards, and promotional financing. Private cards are gaining market share, growing at a 7% annual clip, compared with 5% for traditional offerings, says Bill Carcache, an analyst at Nomura Securities. The industry leader is Synchrony Financial (ticker: SYF), which was spun off from General Electric (GE) in 2014. The company has gained 12 points of market share since 2004, to an estimated 43%, according to the Nilson Report and Nomura, and its loan portfolio should grow by some 8% this year, thanks to continued market-share gains and a healthy U.S. consumer. Synchrony’s retail-card division partners with 22 merchants, including Amazon.com (AMZN) and Chevron (CVX). Synchrony “sits in the sweet spot of the [retail] payments Most Popular ecosystem, where we expect it will continue to outperform,” Carcache noted after it What Recession? GDP Set to Grow 3% announced solid fourth-quarter results on Jan.
    [Show full text]
  • How to Find the Best Credit Card for You
    How to find the best credit card for you Why should you shop around? Comparing offers before applying for a credit card helps you find the right card for your needs, and helps make sure you’re not paying higher fees or interest rates than you have to. Consider two credit cards: One carries an 18 percent interest rate, the other 15 percent. If you owed $3,000 on each and could only afford to pay $100 per month, it would cost more and take longer 1. Decide how you plan to pay off the higher-rate card. to use the card The table below shows examples of what it might You may plan to pay off your take to pay off a $3,000 credit card balance, paying balance every month to avoid $100 per month, at two different interest rates. interest charges. But the reality is, many credit card holders don’t. If you already have a credit card, let APR Interest Months history be your guide. If you have carried balances in the past, or think 18% = $1,015 41 you are likely to do so, consider 15% = $783 38 credit cards that have the lowest interest rates. These cards typically do not offer rewards and do not The higher-rate card would cost you an extra charge an annual fee. $232. If you pay only the minimum payment every month, it would cost you even more. If you have consistently paid off your balance every month, then you So, not shopping around could be more expensive may want to focus more on fees and than you think.
    [Show full text]
  • Schedule of Fees and Charges
    Welcome to Bank of the West! Please keep these important documents with your Deposit Account Disclosure and Safe Deposit Box Rental Agreement Terms and Conditions for Business Accounts booklet and retain them for future reference. Schedule of Fees and Charges for Business Deposit Accounts Page 1-2 Business Checking Accounts Page 3-4 Business Savings, Money Market and Certificate of Deposit Accounts Page 5 Form # 030-08635 (Rev. 12/01/20) AZ,CA,CO,IA,KS,MO,ND,NE,OK,SD,UT,WI,WY © 2020 Bank of the West. Member FDIC Schedule of Fees and Charges for Business Deposit Accounts (Arizona, California, Colorado, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota*, Utah, Wisconsin, Wyoming Branches) Effective December 1, 2020 This Schedule of Fees and Charges (“Schedule”) applies to business Accounts opened in the states referenced above. This Schedule, along with the Deposit Account Disclosure and Safe Deposit Box Rental Agreement Terms and Conditions for Business Accounts, current rate sheet, your current signature card, and any other addenda that may be provided to you at Account opening or from time to time thereafter form the Agreement between you and Bank of the West (“Bank”) as to your checking, money market, savings, certificates of deposit, and retirement Accounts (collectively, the “Agreement”). The Bank reserves the right to add to, delete from, discontinue, or otherwise amend any product, service, fee or charge, package or program offering at any time with such notice as is required by law. To the extent that any of the terms or provisions of this Schedule of Fees and Charges conflict with those contained in any other document in the Agreement, the terms and provisions contained herein shall control.
    [Show full text]
  • Gilchrist Schools Receive an A
    Serving Gilchrist County and Surrounding Area for over 89 Years 207 North Main Street, Trenton, Florida 32693 Phone (352) 463-7135 • Fax (352) 463-7393 $25.00 Digital Only, $25.00 Gilchrist County Price $30.00 Tri-County Area, $40.00 Out of Area Vol. 89 –– No. 8 www.gilchristcountyjournal.net Thursday, July 18, 2019 50¢ FDLE: Gilchrist Crime Rate up 75.8% SchoolSchool GradesGrades By Carrie A. Mizell the FDLE crime report shows a Sheriff Schultz said his department Gilchrist County residents realize The Florida Department of Law discrepancy in his department’s has changed reporting systems twice that this is not Chicago,” Schultz Enforcement’s 2018 Uniform Crime reporting of accurate crime statistics. since 2016 and he knows that only said. “We live in a safe community. Report has found Gilchrist County’s “The numbers that were reported half of the 2017 crime statistics were Anyone who has questions about 2018-20192018-2019 overall crime increased 75.8 percent for 2017 were not as accurate as reported. The sheriff said he typically our crime numbers, come sit and from 2017 to 2018. According to they should have been,” Schultz feels that the FDLE Uniform Crime talk with me, I can show you the real FDLE, robbery was down, while explained. “Whether it was computer Report gives a good representation numbers.” SCHOOL GRADE murder, rape, aggravated assault, or human error, only half of the of crime statistics in a county, but he In April 2018, local residents were burglary, larceny and vehicle theft numbers for 2017 got reported. We does not believe that the latest report rocked when two Gilchrist County was up in 2018.
    [Show full text]