[Federal Register Volume 88, Number 211 (Thursday, November 2, 2023)]
[Notices]
[Pages 75277-75279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24132]


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CONSUMER FINANCIAL PROTECTION BUREAU


Consumer Credit Card Market Report, 2023

AGENCY: Consumer Financial Protection Bureau.

[[Page 75278]]


ACTION: Consumer credit card market report.

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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 [email protected]), 
or Margaret Seikel, Financial Analyst, Division of Research, 
Monitoring, and Regulations ([email protected]). If you require 
this document in an alternative electronic format, please contact 
[email protected].

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\
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    \1\ The Act superseded a number of earlier regulations that had 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), 
http://files.consumerfinance.gov/f/201309_cfpb_card-act-report.pdf; 
CFPB, The Consumer Credit Card Market (Dec. 2015) (2015 Report), 
https://files.consumerfinance.gov/f/201512_cfpb_report-the-consumer-credit-card-market.pdf; CFPB, The Consumer Credit Card Market (Dec. 
2017) (2017 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2017.pdf; CFPB, The Consumer 
Credit Card Market (Aug. 2019) (2019 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2019.pdf; CFPB, The Consumer Credit Card Market (Sept. 
2021) (2021 Report), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.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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1.2 Publication

    In addition to being delivered to Congress, the full report is 
available to the public on the CFPB's website at https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2023.pdf.

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\
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    \3\ 15 U.S.C. 1616(b) (2012).
    \4\ RFI Regarding Consumer Credit Card Market, 88 FR 5313 (Jan. 
27, 2022).
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    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

     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.
     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.
     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.
     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

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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.
     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.
     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.
     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.
     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.
     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.
     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.
     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]
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