CFPB Report Indicates Consumer Credit Card Use Trends Returning to Pre-Pandemic Levels

Troutman Pepper
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Troutman Pepper

[co-author: Dominyka Plukaite]

On September 29, the Consumer Financial Protection Bureau (CFPB) released its biennial report to Congress regarding the consumer credit card climate. The report shows that the market’s growth during the last few years reversed course in 2020. It also provides the latest research findings on consumer credit use, its cost, and consumers’ access to credit, and highlights a few additional important findings:

  • From a 2019 peak of $926 billion, credit card debt fell to $811 billion by the second quarter of 2020, the largest recorded six-month decline, before reaching $825 billion at the end of the year;
  • More than 25 million consumer credit card accounts, representing $68 billion in outstanding credit card debt, entered relief programs in 2020 — figures substantially higher than prior years;
  • Application volume for credit cards decreased significantly in 2020 from its peak levels in 2019, with credit card application approval rates also falling;
  • Late payment and default rates fell to historic lows, mostly for consumers with below prime scores;
  • Consumers with below prime scores saw the greatest limitations in available credit, even as utilization of that credit line decreased;
  • Digital engagement — in the form of consumers signing up for electronic billing statements, online banking, electronic payment of credit card bills, enrollment in mobile apps, etc. — grew consistently among all age groups and nearly every platform type; and
  • Credit lenders continued to make fewer debt collection calls but increased the use of email in collection efforts.

During the pandemic, many credit card holders received some form of federal assistance, either in the form of enhanced unemployment benefits, suspension of payments and interest of federal student loans, and the like. Similarly, credit card lenders provided relief via payment deferrals and fee waivers. “While public and private programs helped consumers bring down their credit card debt during the pandemic, we at the CFPB will be watching to make sure families and individuals still struggling get the assistance they need,” said CFPB Acting Director Dave Uejio. “Across the credit card market, consumers sought and used less credit, paid down debt, and dropped late payment rates to historic lows. As pandemic relief efforts end, the CFPB will be using all our tools to support an equitable recovery.”

The report further highlights several specific areas the CFPB wants to focus on in the immediate future to promote consumers’ equitable financial recovery, including issuer failure to report payment amounts to credit bureaus and issuer practices regarding credit line decreases. The CFPB also intends to increase its use of demographic data in future research.

Our Take. The CFPB’s report tracks our expectations on credit cards due to the pandemic. With Rohit Chopra confirmed as the new CFPB director, as we discussed here, we expect regulatory oversight and enforcement actions to rise. Chopra had an active career at the Federal Trade Commission, focusing on financial services. As such, all companies, not merely credit card issuers, should be proactive in compliance efforts.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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