The CFPB is required to publish an update on the credit card industry every two years in a report to Congress. The most recent report was published in late September, the first report under the newly confirmed Director, Rohit Chopra. Five key points from the report should not surprise followers of the U.S. market; they indicate a drop in consumer credit card volume during COVID, a modest decrease in the cost of credit, tighter credit issuance during the pandemic, continued innovation, and significant relief during the global healthcare crisis.
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.
The total cost of credit (TCC) on revolving accounts continued to increase through 2019 but declined modestly in 2020.
Most measures of credit card availability decreased in 2020 after continued growth since the Great Recession. Application volume for credit cards sharply reduced 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.
Digital engagement is growing consistently across all age groups and nearly every platform type.
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 report also weighed in on Buy Now Pay Later lending (BNPL), citing the emerging payment form as an inclusive model:
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.
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.
Rohit Chopra is the third Director, following Kathy Kraninger and Richard Cordray. During leadership transitions, David Uejio, who oversaw the current credit card report, and Mick Mulvaney, held the role as Acting Director.
With Rohit in the Director role, NPR points out that “his first focus as Director would be the financial impact of the coronavirus pandemic. Millions of Americans are now facing eviction and potential foreclosures due to the job losses caused by the pandemic.”
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group