[Federal Register Volume 86, Number 189 (Monday, October 4, 2021)]
[Notices]
[Pages 54681-54684]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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 
([email protected]), or Margaret Seikel, Financial Analyst, Division 
of Research, Markets & Regulations ([email protected]). If you 
require this document in an alternative electronic format, please 
contact [email protected].

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

[[Page 54682]]

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), https://files.consumerfinance.gov/f/documents/cfpb_2020-consumer-response-annual-report_03-2021.pdf 
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), https://www.jdpower.com/business/press-releases/2020-us-credit-card-satisfaction-study.
    \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), https://www.federalreserve.gov/publications/files/ccprofit2021.pdf.
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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), http://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf; 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; Consumer Fin. Prot., The Consumer Credit 
Card Market (Aug. 2010) (2019 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.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), 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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    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 https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf.

[[Page 54683]]

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:
     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.
     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.
     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), 
https://www.consumerfinance.gov/about-us/blog/credit-card-limits-rising-for-most-groups-after-stagnating-during-pandemic/.
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     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.
     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.
     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.
     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.
     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), https://www.consumerfinance.gov/about-us/newsroom/cfpb-facilitates-libor-transition/.
    \13\ 85 FR 36938 (Jun. 18, 2020), https://www.govinfo.gov/content/pkg/FR-2020-06-18/pdf/2020-12239.pdf.
    \14\ Office of Info. & Regulatory Affairs, Amendments to 
Regulation Z to Facilitate Transition From LIBOR (2021), https://www.reginfo.gov/public/do/eAgendaViewRule?pubId=202104&RIN=3170-AB01.
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     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), https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-23_2021-01.pdf.
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     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), https://www.consumerfinance.gov/rules-policy/innovation/cfpb-tech-sprints/electronic-disclosures-tech-sprint/.
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     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.
     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), https://www.consumerfinance.gov/about-us/blog/the-bureau-is-taking-much-needed-action-to-protect-consumers-particularly-the-most-economically-vulnerable/.
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     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), https://files.consumerfinance.gov/f/documents/cfpb_tech-specs-credit-card-agreement-data-submissions_final-rule_2021-08.pdf.

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