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From Banking and Finance Law Daily, December 28, 2017

CFPB report: Total credit line grows, but still below pre-2008 levels

By Jacob Bielanski

Despite increases in new accounts and a rise in overall credit, the credit card market still has not reached pre-recession credit line levels, a new report from the Consumer Financial Protection Bureau found. The December 2017 congressionally-mandated report on the credit card market found that credit card balances, used and unused, totaled $4 trillion in 2016. The total in mid-2008, the report noted, was $4.4 trillion.

"The market has grown in size, in the number of its offerings and participants, and in the scope and features of its products," the report states in its introduction. "These trends accentuate the importance of monitoring marketplace developments."

One area that had almost reached pre-recession levels, according to the report, was outstanding credit card debt. The combination of outstanding "general" and "private label" debt exceeded $800 billion in the fourth quarter of 2016. Debt levels for those with low credit scores increased 26 percent, faster than the overall average of 9 percent.

Secured credit cards—cards requiring a cash deposit that typically correlates to the spending limit—saw an increase, particularly among new cards for 21 to 34 year-olds and those with subprime or no credit score, according to the report.

The growth in debt, however, has been slower than the growth in credit card purchases, which the report suggests means consumers are using credit cards increasingly for purposes other than longer-term payoff. Rewards programs offered by cards were also increasing, with $6.2 billion in rewards program spending by companies in the first quarter of 2017 alone, a 22 percent increase from the same period the previous year.

Meanwhile, the CFPB found that credit card bank assets routinely performed three times better than commercial bank assets.

Financial technology, or "fintech," companies were an increasing part of credit growth, having accounted for nearly 30 percent of the $80 billion in personal loan origination in 2016, according to the report, compared to 0.9 percent of growth in 2010. The CFPB report said these fintech loans, which come from "non-bank financial institutions," are often marketed for credit card consolidation. These loans, along with growth in point-of-sale credit products, are beginning to have a "notable effect on the rest of the credit market." Such effects included banks increasingly offering similar services as fintech companies, such as the option to place larger credit card purchases on a separate, fixed-term payoff schedule.

The findings came as part of a biennial report, mandated by Congress as part of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009, a responsibility later vested with the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The latest report is the third such released since the mandate.

MainStory: TopStory CFPB ConsumerCredit CreditDebitGiftCards DoddFrankAct FinTech

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