[Federal Register Volume 84, Number 178 (Friday, September 13, 2019)]
[Notices]
[Pages 48331-48333]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19811]


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BUREAU OF CONSUMER FINANCIAL PROTECTION


Consumer Credit Card Market Report of the Bureau of Consumer 
Financial Protection, 2019

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 is issuing its 
fourth biennial Consumer Credit Card Market Report to Congress. The 
report reviews developments in this consumer market

[[Page 48332]]

since the Bureau's most recent biennial report on the same subject in 
2017.

DATES: The Bureau released the 2019 Consumer Credit Card Market Report 
on its website on August 27, 2019.

FOR FURTHER INFORMATION CONTACT: Wei Zhang, Credit Card Program 
Manager, Division of Research, Markets & Regulations 
([email protected]), or Austin Mueller, Financial Analyst, Division of 
Research, Markets & Regulations ([email protected]), or 202-435-
7000. If you require this document in an alternative electronic format, 
please contact [email protected].

SUPPLEMENTARY INFORMATION: 

Message From Kathleen L. Kraninger, Director

    Credit cards are one of the most commonly-held and widely-used 
financial products in America. At last count, nearly 170 million 
Americans hold credit cards, many of them carrying more than one. Some 
consumers use these strictly as payment devices, paying their balances 
in full each month, while others use them as a source of credit and 
carry a balance from month to month.
    The Credit Card Accountability Responsibility and Disclosure Act 
(CARD Act or Act) \1\ requires the Bureau to prepare a biennial report 
to Congress regarding the consumer credit card market. This is the 
Bureau's fourth report, and details findings regarding, among other 
things, the cost and availability of credit and innovations in the 
credit card marketplace. The report also emphasizes that with the 
passage of time, it is becoming increasingly difficult to correlate the 
CARD Act with specific effects in the marketplace that have occurred 
since the issuance of the Bureau's last biennial report, and, even more 
so, to demonstrate a causal relationship between the CARD Act and those 
effects. Accordingly, while the Bureau will continue to report on the 
CARD Act's effects where appropriate and feasible, the Bureau 
anticipates future reports will focus more on overall conditions in the 
credit card market.
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    \1\ Public Law 111-24, 123 Stat. 1734 (2009).
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    Evidence-based research like this is one way in which the Bureau 
discharges its statutory duty to monitor for risks to consumers in the 
offering or provision of consumer financial products and services. It 
is my hope that the publication of this report with the latest data on 
this important market will be useful to consumers, providers of credit 
card products, and policymakers.

1. Consumer Credit Card Market Report of the Bureau of Consumer 
Financial Protection, 2019

1.1 Review Mandate

    In May 2009, Congress passed the CARD Act. The Act made substantial 
changes to the credit card market. Its stated purpose was to 
``establish fair and transparent practices related to the extension of 
credit'' in the credit card marketplace.\2\ The Act mandated new 
disclosures and underwriting standards, curbed certain fees, and 
restricted certain interest rate increases on existing balances.\3\
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    \2\ Id.
    \3\ A full summary of CARD Act rules implemented by the Board is 
at pages 11 through 13 of the Bureau's 2013 Report. See Bureau of 
Consumer Fin. Prot., Card Act Report, (Oct. 1, 2013) (2013 Report), 
http://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf. 
The Bureau subsequently reissued these rules without material 
changes in December 2011. It has since amended the ability to pay 
rules and the fee harvester rules implemented by the Board. These 
later changes became effective in, respectively, May and March, 
2013.
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    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 ``within the limits of its existing resources available for 
reporting purposes'' on the consumer credit card market, including a 
number of specified topics.\4\ With the passage of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010, 
that requirement passed to the Bureau of Consumer Financial Protection 
(Bureau) alongside broader responsibility for administering most of the 
CARD Act's provisions. This is the fourth report published pursuant to 
that obligation, building on prior reports published by the Bureau in 
2013, 2015, and 2017.\5\
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    \4\ 15 U.S.C. 1616(a) (2012).
    \5\ See 2013 Report, supra note 3; Bureau of Consumer Fin. 
Prot., The Consumer Credit Card Market, (Dec. 2015)(2015 Report), 
http://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf; Bureau of Consumer Fin. Prot., The Consumer 
Credit Card Market, (Dec. 2017) (2017 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf. 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), available at https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-public-inquiry-on-the-impact-of-the-card-act.
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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 https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.pdf.

1.3 Summary of Report

    The full 2019 report reviews the state of the consumer credit card 
market as of the end of 2018. 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.\6\ 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.\7\
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    \6\ 15 U.S.C. 1616(b) (2012).
    \7\ Request for Information Regarding Consumer Credit Card 
Market, 84 FR 647 (Jan. 31, 2019).
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    Over the last few years, the credit card market, the largest U.S. 
consumer lending market measured by number of users, has continued to 
grow in almost all dimensions and measures. Market conditions remain 
stable, in large part because of low unemployment, modest wage growth, 
and high consumer confidence in the past two years. Credit cardholders 
continue to use their cards to facilitate transactions, smooth 
consumption, and earn rewards, all with the added security of stringent 
limitations on liability. Consumer satisfaction with credit cards 
remains high, while consumers' debt service burden remains near its 
lowest level recorded in more than a decade.
    Late payment and default rates have risen modestly over this period 
but remain below pre-recession levels. In general, credit card issuers 
continue to generate profitable returns consistent with historical 
levels. Innovation has continued to reshape the 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 new ways of issuing credit cards.\8\
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    \8\ Any reference in the 2019 report (or earlier reports) 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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    Since passage of the CARD Act, researchers, including the Bureau, 
have studied the effects of the CARD Act on the cost and availability 
of credit to consumers. This report discusses that research. However, 
the Bureau also emphasizes that with the passage of time, it is 
becoming increasingly

[[Page 48333]]

difficult to correlate the CARD Act with specific effects in the 
marketplace that have occurred since the issuance of the Bureau's last 
biennial report, and, even more so, to demonstrate a causal 
relationship between the CARD Act and those effects. Accordingly, while 
the Bureau will continue to report on the CARD Act's effects where 
appropriate and feasible, the Bureau anticipates that future reports 
will focus more on overall conditions in the credit card market.
    Continuing past practice, the 2019 report revisits most of the same 
baseline indicators as prior reports to track key market developments 
and trends. In addition, the report reviews significant findings from 
economics scholarship focused on the CARD Act. Below is a summary of 
the core findings from each section of the report:
     Total outstanding credit card balances have continued to 
grow and at year-end 2018 were nominally above pre-recession levels. 
Throughout the post-recession period, including the period since the 
Bureau's 2017 Report, purchase volume has grown faster than outstanding 
balances. After falling to historical lows in the years following the 
recession, delinquency and charge-off rates have increased over the 
last two years. Late payment rates have increased for new originations 
of general purpose and private label cards, both overall and within 
different credit tiers.
     The total cost of credit (TCC) on revolving accounts has 
increased over the last two years and in 2018 stood at 18.7 percent, 
which is the highest overall level observed in the Bureau's biennial 
reports. Recent TCC increases are largely the result of increases in 
the indices underlying variable rates, such as the prime rate. General 
purpose cards, which generally have interest rates linked to the prime 
rate, have driven the increase across every credit tier. TCC has fallen 
over the last two years for private label cards, in part because 
relatively fewer of these cards have rates linked directly to index 
rates, offset by a decline in fees as a share of balances.
     Most measures of credit card availability--overall and 
across credit score tiers--have remained stable or decreased slightly 
since the Bureau's 2017 Report. Measured by application volume, 
consumer demand for credit cards peaked in 2016. Approval rates have 
also declined slightly since 2016. Driven by lower approval rates, 
annual growth in the number of credit card accounts opened and the 
amount of credit line on new accounts has also leveled off. Even so, 
total credit line across all consumer credit cards reached $4.3 
trillion in 2018, nearly equal to its pre-recession high, largely due 
to the growth in unused line on accounts held by consumers with 
superprime scores.
     Cardholders have increased their use of rewards cards, 
thereby driving up the cost to industry to fund these products. The 
level and consumer cost of balance transfer and cash advance use 
remains largely unchanged.
     In the ten years since the CARD Act was passed, social 
scientists have examined the Act's effects on consumers and the credit 
card market as a whole. Using a range of theoretical and empirical 
approaches, scholarship has looked at a range of potential direct and 
indirect effects of the CARD Act, including pricing, credit 
availability, consumer repayment behavior, and cardholding.
     Since the 2017 Report, issuers have lowered the range of 
their daily limits on debt collection phone calls for delinquent credit 
card accounts. In addition, over that same period, the volume of 
balances settled through for-profit debt settlement companies (DSCs) 
grew at a faster rate than issuers' overall accounts receivable did.
     New technologies further enhance consumers' interactions 
with and control over their credit cards--from originating one card 
rather than another, to ways of transacting and paying. Cardholders 
increasingly use and service their cards through digital portals, 
including those accessed via mobile devices. New technologies such as 
artificial intelligence and machine learning, as well as new data 
sources, are changing how providers are able to manage risk and provide 
customer service.

1.4 Regulatory Agenda

    As discussed in its Unified Agenda for Spring 2019, the Bureau is 
undertaking initiatives to review inherited regulations for the purpose 
of ensuring that outdated, unnecessary, or unduly burdensome 
regulations are regularly identified and addressed in order to reduce 
unwarranted regulatory burdens, as well as to fulfill other purposes 
and objectives of the Bureau and the statutes enumerated in the Dodd-
Frank Wall Street Reform and Consumer Protection Act, including the 
Truth In Lending Act (TILA), wherein the CARD Act is codified.\9\ As 
part of its long-term agenda, the Bureau expects to focus on subparts B 
and G of Regulation Z, which implement the Truth in Lending Act with 
respect to open-end credit generally and credit cards in particular. 
For instance, the Bureau expects to consider rules to modernize the 
procedures for submitting credit card agreements to the database of 
credit card agreements that it is required to maintain under the CARD 
Act to reduce burden on issuers that submit credit card agreements to 
the Bureau and make the database more useful for consumers and the 
general public. The Bureau expects to identify other opportunities to 
clarify ambiguities, address developments in the marketplace, and 
modernize or streamline the open-end credit provisions. That effort 
will be informed by the Bureau's ongoing monitoring of the consumer 
credit card market, including the 2019 report.
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    \9\ See https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201904&RIN=3170-AA73.

    Dated: August 16, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-19811 Filed 9-12-19; 8:45 am]
 BILLING CODE 4810-AM-P