A Perspective on Credit Card Usage and Consumer Performance

Transcription

1 February 22, 2011 Consumer Financial Protection Bureau A Perspective on Credit Card Usage and Consumer Performance Ezra D. Becker Vice President, Research and Consulting Financial Services Group ebecker@transunion.com (312)

2 Summary Understanding credit card performance requires a view across product types This is one of the reasons it is tough to isolate clean metrics for credit card supply and demand We present here some usage trends that speak to the supply-demand dynamic We also explore how usage trends vary by geography and across the risk spectrum 2

3 February 22, 2011 Consumer Financial Protection Bureau An Example of Looking across Products: The Payment Hierarchy Reversal

4 Most lenders agree that the traditional payment hierarchy had been established for years The first product type to enter delinquency would be the credit card(s) The next to go would be the car loan(s) Only in the most dire circumstances would one stop paying the mortgage TransUnion LLC All Rights Reserved

5 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 Incident Delinquency Rates Trends in serious delinquency rates indicated that a material shift in payment prioritization had occurred A Comparison of Product Delinquency Rates 8% Consumer Credit Card 90+ DPD Rate Consumer Mortgage 60+ DPD Rate 7% 6% 5% 4% 3% 2% 1% 0% Quarter 5

6 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 Incident Delinquency Rates This trend was not isolated to specific geographic markets, but was occurring across the U.S. A Comparison of Product Delinquency Rates in Minnesota 6% MN Consumer Credit Card 90+ DPD Rate MN Consumer Mortgage 60+ DPD Rate 5% 4% 3% 2% 1% 0% Quarter 6

7 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 % of Consumers with both a Mortgage and at Least 1 Bankcard This payment hierarchy reversal illustrates a behavioral change consumers paying cards before mortgages A View of Payment Prioritization 8% 7% 6% 5% 4% 3% 2% 1% 0% % of Consumers 30+ DPD on Mortgages / Current on Bankcards % of Consumers Current on Mortgages / 30+ DPD on Bankcards % of Consumers 30+ DPD on Mortgages and 30+ DPD on Bankcards Quarter 7

8 Further analysis of how payment preferences vary by age group can yield interesting insights Payment Preference by Age Group Source: A survey of 2,914 consumers performed the week of 10/12/09 for TransUnion by Zogby International 8% Survey Question: If you only have enough money to pay one of these loan obligations this month, would you pay your credit card bill or your mortgage? 7% 6% 5% 4% Pay Card 1st Other/Not Sure 3% 2% 1% 0%

9 February 22, 2011 Consumer Financial Protection Bureau Some Perspectives on Credit Card Usage

10 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 Ratio of Borrowers who Have an Active Bankcard Credit card usage grew over several years prior to the latest recession, then fell precipitously Ratio of Active Bankcard Users 85% USA CA FL IL ND 80% 75% 70% 65% 60% Quarter 10

11 The drop in active bankcard usage has been more pronounced in higher-risk segments Ratio of Active Bankcard Users 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Super Prime Prime Near Prime Subprime Prior to Recession Middle of Recession Most Recently 11

12 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 Number of Active Bankcards per Consumer The number of active bank cards per consumer hit a plateau a few years ago and has fallen considerably Number of Active Bankcards per Consumer 3.25 USA CA FL IL ND Quarter 12

13 The number of active bank cards per consumer has dropped across the risk spectrum Average # of Active Bankcards per Consumer Prior to Recession Middle of Recession Most Recently Super Prime Prime Near Prime Subprime 13

14 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 TransUnion Credit Risk Index Not surprisingly, there have been increases in consumer credit risk across geographies TransUnion Credit Risk Index 160 USA CA FL IL ND Quarter 14

15 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 Average Credit Limit/High Credit of Active Bankcards per Bankcard Borrower Issuers have reduced card credit limits as part of their efforts to control risk exposure Average Credit Limit of Active Bankcards per Cardholder $36,000 USA CA FL IL ND $30,000 $24,000 $18,000 $12,000 Quarter 15

16 Average credit limits have dropped across the risk spectrum Average Credit Limit of Active Bankcards per Cardholder $60,000 $50,000 $40,000 $30,000 Prior to Recession Middle of Recession Most Recently $20,000 $10,000 $0 Super Prime Prime Near Prime Subprime 16

17 Q1 00 Q2 00 Q3 00 Q4 00 Q1 01 Q2 01 Q3 01 Q4 01 Q1 02 Q2 02 Q3 02 Q4 02 Q1 03 Q2 03 Q3 03 Q4 03 Q1 04 Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q4 07 Q1 08 Q2 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q4 10 Total Bankcard Debt per Consumer In general, we ve seen a material drop in bankcard debt Total Bankcard Debt per Consumer $4,500 USA CA FL IL ND $4,000 $3,500 $3,000 $2,500 $2,000 Quarter 17

18 The reduction in bankcard debt has been across the risk spectrum Total Bankcard Debt per Consumer $7,000 $6,000 $5,000 $4,000 $3,000 Prior to Recession Middle of Recession Most Recently $2,000 $1,000 $0 Super Prime Prime Near Prime Subprime 18

19 Summary Card usage has changed considerably over the past few years, and will continue to evolve A look across products is increasingly more critical Card demand and supply remain difficult to isolate and measure effectively Changing card usage is driven by an array of factors Perceptions of card availability and lender scrutiny Competing product availability Consumer confidence and economic stability Actual losses and risk considerations Regulatory & legislative requirements Other drivers 19

20 Thank You Ezra Becker (312)