As reported by Michael Lamm, managing partner of ACA member firm Corporate Advisory Solutions (CAS), credit cards continue to compose the largest consumer lending market.
The Consumer Financial Protection Bureau (CFPB)’s biennial report on the 2017-2018 credit card market released in August reports credit cards continue to compose the largest consumer lending market in the U.S. measured by number of users, according to CAS Insights Q3, CAS quarterly OBS M&A Market Alert.
Credit card debt has sustained constant growth, reaching approximately $900 billion (nominal value) in 2018, which is well above the peak of $792 billion before the recession.
This trend continued in recent months, where credit card borrowing increased $10 billion in July after falling by $186 million in June.
In addition, innovation in risk management and underwriting has allowed credit card issuers to offer credit cheaply to more consumers, even to those who lack a sufficient credit data/score, which benefits the credit card market.
The findings also state that credit card market conditions remain steady thanks to low unemployment, the continuation of modest wage growth, and high consumer confidence – while late payments and delinquency rates have begun to rise slightly, although remaining below pre-recession levels.
Focus on Delinquency Level – General-Purpose Credit Cards
The report shows that the delinquency level of general-purpose credit cards (cards accepted by all merchants) hovers at a similar level as the pre-recession average of 1.5%.
Focus on Delinquency Level – Private Label Credit Cards
However, for private label cards (cards accepted at only one or related merchants), delinquency rates peaked in 2018 surpassing that of during the recession.
It is suspected that private label cards have been increasingly issued to those with lower credit scores, which may have contributed to higher delinquency rate. This trend appears similarly in the charge-off balances for both general-purpose and private label cards, as shown by the modest increase in the last several years.
Approximately 28% of consumers with a credit file are stated to have an account on their credit report assigned to third-party collections.