The Consumer Financial Protection Bureau (Bureau) today released its fourth biennial report on the state of the credit card market for the period 2017-2018. In 2009, the Credit Card Accountability Responsibility and Disclosure Act (Act) made substantial changes to the legal requirements applicable to the credit card market, with Section 502 of the Act also requiring that a report be issued every two years with respect to the market.
Credit cards remain central to Americans’ financial lives, constituting the largest U.S. consumer lending market (measured by the number of users). Market conditions remain stable as a result of low unemployment, modest wage growth and high consumer confidence. Consumer satisfaction with credit cards remains high and debt service burdens are near the lowest level in more than a decade. Late payment and default rates have risen modestly but remain below pre-recession levels. Since 2015, consumers have more than doubled spending with credit cards with only modest balance growth. The great majority of credit card spending results in consumers obtaining rewards, and surveys indicate rewards are the primary factor consumers consider in choosing a credit card.
The report also includes a section evaluating the academic scholarship examining the Act’s effects. The scholarship review suggests that the Act’s effect on consumer welfare is mixed, with some scholarship suggesting the Act may have had unintended consequences. The Report also outlines the challenges that exist in clearly articulating how the market continues to be impacted by the legislation, particularly with the passage of a decade. The market is rapidly evolving, particularly as new technology provides a wider spectrum of choice to consumers.
As part of its mandate, the Bureau is tasked with assessing credit card product innovation. Digital technologies and advancements like machine learning and artificial intelligence are increasing convenience and access for credit card consumers, with promising potential to enhance financial well-being.