The Consumer Credit Card Market 2017

December 2017

The Consumer Credit Card Market

Table of contents

Table of contents.........................................................................................................2

Executive summary.....................................................................................................5

1. Introduction.........................................................................................................16 1.1 Review mandate...................................................................................... 16 1.2 Scope ........................................................................................................17 1.3 Methodology ........................................................................................... 18

2. Market size and foundational metrics of consumer use .................................30 2.1 Total market size..................................................................................... 31 2.2 Market metrics by credit score ............................................................... 39 2.3 Consumer-level metrics of market size .................................................. 45 2.4 Card payment behavior........................................................................... 54 2.5 Rewards................................................................................................... 59 2.6 Delinquency and charge-off.................................................................... 65

3. Cost of credit.......................................................................................................71 3.1 Total cost of credit .................................................................................. 72 3.2 Interest rates ........................................................................................... 77 3.3 Fees . ....................................................................................................... 87 3.4 Cash advances ......................................................................................... 97

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CONSUMER FINANCIAL PROTECTION BUREAU -- CONSUMER CREDIT CARD MARKET REPORT

3.5 Deferred interest promotions ................................................................101

4. Availability of credit..........................................................................................111 4.1 New accounts ......................................................................................... 112 4.2 Credit lines ............................................................................................ 143

5. Credit card issuer practices ............................................................................163 5.1 Digital account servicing....................................................................... 163 5.2 Credit score access .................................................................................174 5.3 Balance transfers....................................................................................177 5.4 How complicated are credit cards? ...................................................... 195

6. Products marketed to "non-prime borrowers" ..............................................205 6.1 Consumers without prime credit scores...............................................205 6.2 Unsecured general purpose cards offered by mass market issuers ..... 207 6.3 Products offered by subprime specialists .............................................208 6.4 Private label credit cards ...................................................................... 210 6.5 Secured credit cards.............................................................................. 213 6.6 Consumer use of these products...........................................................234

7. Third-party comparison sites ..........................................................................265 7.1 Introduction .......................................................................................... 265 7.2 Product and market overview............................................................... 267 7.3 Consumer experience ........................................................................... 277 7.4 Behind the scenes ................................................................................. 292 7.5 Future developments ........................................................................... 300

8. Credit card debt collection ..............................................................................301 8.1 Definitions.............................................................................................302

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CONSUMER FINANCIAL PROTECTION BUREAU -- CONSUMER CREDIT CARD MARKET REPORT

8.2 Debt collection markets ........................................................................303 8.3 Debt collection and recovery practices.................................................308 8.4 Survey findings ..................................................................................... 312

9. Product innovation ...........................................................................................334 9.1 Innovations discussed above ................................................................ 335 9.2 Topics from the 2015 Report ................................................................ 335 9.3 Other developments.............................................................................. 347

Appendix: Balance transfer payoff methodology.................................................351

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Executive summary

Every year, consumers use hundreds of millions of credit cards to spend trillions of dollars and revolve hundreds of billions of dollars of debt. Credit card issuers, payment card networks, and other market players spend billions of dollars annually to promote their brands and attract new customers. In 2017, Forbes magazine included three of the four largest American payment card networks, as well as a number of the largest credit card-issuing banks, in their list of the 100 most valuable brands in the world.1

In 2015, we wrote that "[t]he credit card marketplace is among the largest, most diverse, and most complex markets of any consumer financial product."2 Over the last two years, that statement has become even more appropriate. The market has grown in size, in the number of its offerings and participants, and in the scope and features of its products. These trends accentuate the importance of monitoring marketplace developments, as the Bureau has been instructed by Congress to do on a biennial basis.

Below, we discuss the background for this report. We then summarize the key findings of the report. We conclude with a note about consumer satisfaction and issuer profitability.

1 See Forbes, The World's Most Valuable Brands, (2017 Ranking), available at .

2 Consumer Fin. Prot. Bureau, The Consumer Credit Card Market, at 7 (Dec. 2015) ("2015 Report"), available at .

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BACKGROUND In 2009, Congress passed the Credit Card Accountability Responsibility and Disclosure Act ("CARD Act" or simply "Act").3 The CARD Act superseded a number of earlier regulations that had been finalized by three large Federal financial regulators but had yet to be implemented.4 The Act entailed substantial changes for the credit card market. New disclosures and underwriting standards were mandated, certain fees were curbed, and interest rate increases on existing balances were restricted.

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 in 2010, that requirement passed to the Consumer Financial Protection Bureau ("Bureau" or "CFPB") alongside broader responsibility for administering most of the CARD Act's provisions. This is the third report published pursuant to that obligation, building on prior reports published by the Bureau in 2013 and 2015.5

Our 2013 Report focused on trends in the credit card marketplace before and after the CARD Act. Because the implementation of the Act coincided with a period of economic recovery, it was difficult to tease out the effects of the CARD Act. We did not see any evidence that the Act had negatively affected the consumer cost of credit cards. In fact, we found that all-in costs to cardholders had fallen in the wake of the Act's passage and continued to fall through its

3 Pub. L. No. 111-24, 123 Stat. 1734.

4 Those rules, promulgated jointly by the Office of Thrift Supervision ("OTS"), the National Credit Union Administration ("NCUA"), and the Board of Governors of the Federal Reserve System, were announced in December of 2008 and published in the Federal Register the following month. Unfair or Deceptive Acts or Practices, 74 Fed. Reg. 5498 (Jan. 29, 2009) (to be codified at 12 C.F.R. part 226).

5 See Consumer Fin. Prot. Bureau, Card Act Report, (Oct. 1, 2013) ("2013 Report"), available at . f/201309_cfpb_card-act-report.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, Consumer Fin. Prot. Bureau, CFPB Launches Public Inquiry on the Impact of the Card Act (Dec. 19, 2012), available at .

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implementation.6 We also noted that the CARD Act increased transparency in the consumer credit card market, principally by simplifying the cost structure of card products. With certain exceptions, we also did not find evidence that the CARD Act had reduced access to credit.7

Our 2015 Report had a broader scope. We continued to assess post-CARD Act trends, generally corroborating the findings of our 2013 Report and finding that most of the market trends we identified in 2013 had persisted over the two-year interval between reports. We also laid out a broader set of market indicators, establishing potential baselines against which to measure the evolution of the market in future reports. In addition, we did a number of "deep dives" into certain issuer practices in the market--namely, deferred interest promotions, rewards credit cards, and debt collection.

OUR 2017 REPORT This report continues the approach of our 2015 Report. We revisit most of our baseline indicators to track key market developments and trends. We also revisit some of the 2015 deepdive topics to assess how the market has developed. We do two new deep dives. The first looks at various indicators for a range of credit card products marketed to and used by consumers who lack prime credit scores. The second covers rapidly emerging "third-party comparison websites" as they implicate the credit card market.

Below we summarize the findings of each section of the report. Overall, we note the following core points:

The cost of card credit remains largely stable since our last report. This is true in general and across credit score tiers. Cost structures--the allocation of costs to interest charges and fees--are also unchanged;

6 See 2013 Report, at 32-35.

7 See id. at 60-61. We did identify a number of restrictions on availability--such as card originations to students, or ability-to-pay restrictions on origination and credit line increases--that appeared to be intended results of the CARD Act. See id. at 43-44, 60-61.

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CONSUMER FINANCIAL PROTECTION BUREAU -- CONSUMER CREDIT CARD MARKET REPORT

 Most measures of credit card availability--overall and across credit score tiers--have remained stable or have increased since our last report;

The market shows significant innovation. Rewards programs of all kinds proliferate, new digital account servicing tools help consumers manage purchases, debt, and account security, and new providers are entering this and adjacent markets with new products that compete with incumbents;

After falling to historical lows in the years following the recession, delinquency and chargeoff rates have increased over the last year. This uptick in delinquency and charge-off rates remains small, but is occurring in the absence of any concurrent deterioration in broader economic conditions;

Total outstanding credit card debt has continued to grow since our last report and is now at pre-recession levels. Throughout the post-recession period, including the period since our last report, purchase volume has grown faster than outstandings;

The portion of the market that serves consumers with non-prime credit scores continues to evolve. Three trends in particular stand out:

A long-term trend that remains evident in recent data is the increasing importance of private label credit cards to consumers with non-prime credit scores. These consumers have always found private label credit more accessible than other credit card products, but consumers with non-prime scores now hold far more of their outstanding balances on private label cards than they did before the recession;

A more recent trend is that issuers, consumers, and market observers have all intensified their interest in secured credit cards. Secured credit cards' market share, while still small, is growing;

There are indications that issuers may be putting increasing weight on credit line management as a risk control mechanism. Issuers have always used this tool, but appear to be using it now with increasing intensity and frequency;

Overall, issuers have lowered their daily limits on debt collection phone calls for delinquent credit card accounts since our last report. The majority of issuers now supplement their internal collections strategy with email use, but their third-party collection networks typically do not send emails; and

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