In today’s CardFlash News Que: SYNCHRONY (FRB); PIVOTAL (Breeders); CSI (IOFM); and TECHNAVIO (india).
Credit quality continues to improve quarter-to quarter and year-to-year and it appears the bank credit card charge-off plague is quickly subsiding. Tighter underwriting, manageable credit limits, departure of bad credits, not to mention the improving economy, have all contributed to taking charge-offs to historic lows for most U.S. issuers. Charge-offs among the nation’s largest bank credit card issuers fell, on average, by 62 basis points in 2013, to 3.25% at year’s end. After peaking at 10.79% in Q2/2010, charge-offs have returned to levels not seen since 2006 in the U.S.. Discounting the seasonal first quarter contraction in average credit card loans, charge-offs have declined for 14 consecutive quarters.
While credit card charge-offs among the top U.S. issuers have fallen to seven year lows in 2013, there are some scattered clouds on the horizon as early stage delinquency (30+ days) headed north in the second half of 2013 by six basis points. However, late stage delinquency (90+ days) was down three basis points from 2Q/2013 but up three basis points sequentially in Q4/2013. Historically, delinquency rates are slightly depressed in the fourth quarter due to the higher level of outstandings, driven by holiday spending.
U.S. credit card margins and yields have largely been holding steady over the past year. However, Citibank reported that its net credit margin for credit cards rose 89 basis points in the third quarter to 11.16%. Net credit margin is total revenues, net of interest expense, less net credit losses and policy benefits and claims. Chase reports its total net revenue for credit cards declined slightly from 12.46% one-year ago to 12.22% in the third quarter of this year. Total net revenue is a percentage of average loans.
American Express Company has reached settlements with several regulatory agencies to resolve previously disclosed reviews of certain aspects of the company’s U.S. consumer card practices. Similar settlements were reached with several of the company’s subsidiaries, including American Express Centurion Bank; American Express Bank, FSB; and American Express Travel Related Services Company, Inc. The settlements were…
Al Paisley has joined First Republic Bank private banking. Bringing with him more than 25 years’ financial services experience, Paisley will work with First Republicâs team to provide business banking services such as lending services, deposit services, cash management, foreign exchange, online banking, and business escrow. He most recently comes from Citibank, where he was VP for the past 15 years. Paisley earned a Bachelor of Science degree in Finance/Accounting from University of Southern California. Founded in 1985, First Republic Bank has offices in San Francisco, Los Angeles, Santa Barbara, Newport Beach, San Diego, Portland, Seattle, Boston, Greenwich and New York City.
The Federal Reserve Board has proposed a rule amending Regulation Z
(Truth in Lending) to protect credit card users from unreasonable late
payment and other penalty fees. The proposed rule would
prohibit credit card issuers from charging penalty fees (including late
payment fees and fees for exceeding the credit limit) that exceed the
dollar amount associated with the consumer’s violation of the account
terms. For example, card issuers would no longer be permitted to charge
a $39 fee when a consumer is late making a $20 minimum payment. Instead,
the fee could not exceed $20. The proposal is also to ban inactivity fees, such as fees based on
the consumer’s failure to use the account to make new purchases; prevent
issuers from charging multiple penalty fees based on a single late
payment or other violation of the account terms; require credit card
issuers to inform consumers of the reasons for increases in rates and
require issuers that have increased rates since January 1, 2009 to
evaluate whether the reasons for the increase have changed and, if
appropriate, to reduce the rate. The provisions of the Credit Card Act
addressed in this proposal will go into effect on August 22, 2010. In
July 2009, the Board issued a rule implementing the provisions of the
Credit Card Act that went into effect on August 20, 2009. In January
2010, the Board issued a rule to implement the provisions of the Credit
Card Act that went into effect on February 22, 2010.
The Federal Reserve has rolled out a public service ad campaign to
advise smart use of credit cards by consumers this holiday season.
The advertisements will appear before movie previews at 12 highly
attended theaters in major metropolitan areas from November 27 through
December 3. The ads provide tips for getting the most from credit cards,
including paying on time, staying below the card’s credit limit,
avoiding unnecessary fees, paying more than the minimum payment, and
watching for changes in account terms.
The National Retail Federation has asked the Federal Reserve to reconsider proposed new rules that threaten retailersâ ability to offer customers instant credit. NRF believes that the proposed regulations go beyond what was required under the legislation, and asked the Fed to accept the use of credit scores as an acceptable means of considering a customerâs ability to pay. Retailers currently use computerized systems that rely on a customerâs credit score and other credit-related information to assess individualsâ payment history on existing and/or previous credit and provide a yes-or-no decision within a manner of seconds. But the Credit CARD Act would bar credit from being granted unless the issuer âconsiders the ability of the customerâ to pay under the terms of the account. The Fed has interpreted that as meaning retailers must review the credit applicantâs income or assets along with their current obligations. Income and asset information is not readily available in a central database, so the Fed proposal would turn “instant” credit into a process that could take days to gather the required information.
The Federal Reserve Board has announced proposed rules that would
restrict the fees and expiration dates that may apply to gift cards.
The proposed rules would prohibit dormancy, inactivity, and service fees
on gift cards unless: (1) there has been at least one year of inactivity
on the certificate or card; (2) no more than one such fee is charged per
month; and (3) the consumer is given clear and conspicuous disclosures
about the fees. Expiration dates for funds underlying gift cards must be
at least five years after the date of issuance, or five years after the
date when funds were last loaded.
The Federal Reserve Board has approved an interim final rule amending “Regulation Z” to require creditors to provide written notice to consumers 45 days before the creditor increases an annual percentage rate on a credit card account or makes a significant change to the terms of a credit card account; must inform consumers in the same notice of their right to cancel the credit card account before the increase or change goes into effect. (If a consumer does so, the creditor is generally prohibited from applying the increase or change to the account.); and, creditors generally must mail or deliver periodic statements for credit cards and other open-end consumer credit accounts at least 21 days before payment is due. The revisions are the first stage in the FRB’s implementation of the “Credit CARD Act.”
The chairman of the Senate Banking Committee is asking bank regulators to draft new regulations requiring all interest rate increases that have taken place this year to be subject to a mandatory 6-month review. In a letter to the FRB, FDIC, OCC, OTS and NCUA, Senator
Christopher Dodd says he is disturbed by recent reports in the press that some credit card companies are allegedly raising interest rates on their customersâ existing balances without justification. He asked the regulators to immediately notify all credit card companies under their respective jurisdictions that they will be held accountable for all interest rate increases this year and will be subject to the review requirement once the “Credit CARD ACT” takes effect next year. Dodd noted that the look-back provision will serve as a deterrent only if it will be implemented and enforced effectively.