Late stage delinquency among the nation’s Big 6 issuers will be pushed higher in 2015 as 30 day to 89 day delinquency begins its climb in the first quarter. Forecaster RAM Research projects 90+ day delinquency among the Big 6 will inch up from an average of 99 basis points (bps) in Q4/14 to 105 bps by end-of-year (EOY) 2015.
Credit card Asset-Backed Securities (ABS) metrics for the February reporting period will weaken slightly in line with seasonal trends, but should remain near record levels of strength. The Monthly Payment Rate (MPR) fell to 27.36% in January and will likely slightly decline through the first quarter due to seasonal trends.
TCF Financial Corporation posted 1Q/11 net income of $29.7 million, compared with $33.9 million in the first quarter of 2010. With this, card revenues totaled $26.6 million, down 1.8% from 1Q/10 and down $1 million by 3.8% from 4Q/10, thanks in great part to seasonal decreases in sales volume. Meanwhile, the net interest margin was 4.06 percent, compared with 4.21 percent in the first quarter of 2010 and 4.05 percent in the fourth quarter of 2010. Also, its banking fees and service charges only reached $53.5 million, down $12.7 million by 19.1% from 1Q/10 and down $8 million by 13% from 4Q/10. This is a direct reflection of overdraft fee regulations implemented in 3Q/10, a decrease in the number of checking accounts and customers maintaining higher average deposit balances, lower seasonal activity and lower monthly maintenance fees as more customers qualified for fee waivers.
TCF is leading the fight against the Durbin Interchange amendment. Questioning the constitutionality of the Durbin Amendment’s exemption for banks with assets less than $10 billion under the equal protection clause of the U.S. Constitution, TCF is adamant the government’s position on a two-tier pricing system for banks above and below $10 billion in assets will eventually result in a single rate to all banks is speculation on the government’s part.
New regulations on credit cards and fixed- and variable-rate loans and
lines of credit, will come into force on January 1, 2010 to insure
better communication of information for consumers of financial products
and services offered by federally regulated financial institutions.
Effective January 1, 2010, the legislation will require a summary box
containing all prescribed information to clearly indicate interest
rates, grace periods and fees; a consumer consent on credit limit
increases; no over-the-limit fees due to holds; new federally-regulated
debt collection practices; and in most cases all borrowers on a joint
loan must receive the information documents. The Financial Consumer
Agency of Canada (FCAC), encourages consumers to be familiar with these
regulations and those effective September 1, 2010, which disclose
consumers will no longer pay interest on new purchases for 21 days after
the statement date if you pay your balance in full by the current
month’s due date; institutions have to apply any payments made in excess
of the required minimum to the balance with the highest interest rate
and to other balances in decreasing order of interest rate or on the
relative proportion of each; credit card statements issued by federally
regulated financial institutions must indicate how much time it will
take you to pay the current balance in full if you pay only the required
minimum each month.
The recent summit held by the Federal Reserve Bank in Cleveland, “Protecting Consumers in the Credit Marketplace”, focused on the role of consumer credit, developing credit markets and the necessity for access to credit information. As discussed in the summit, credit provides an important outlet for the savings of consumers through the financial intermediation process and that the source of funds for consumers who borrow is other consumers who have savings they hold in deposit accounts, life insurance and pension reserves, or portfolios of securities that include bonds, stocks, and mutual fund shares. A key challenge is to find ways to improve consumers’ ability to identify products that are suitable to their needs without diminishing the benefits market innovations can provide and without reducing future access to credit. One important way this challenge can be met is by improving the information available to consumers. Accurate and complete information about credit terms and prices is essential for households to make sound judgments about the use of credit. Disclosures must give consumers information about credit pricing and important terms at a time when it is relevant, and in language consumers can easily understand. Effective disclosures give consumers information they notice, understand, and can use.
Target and Chase have announced a deal under which Chase will invest in Target’s credit card receivables. At closing Target would sell an undivided interest in its credit card receivables to Chase for cash proceeds of approximately $3.6 billion. This interest would represent approximately 47% of the principal amount of Target’s outstanding receivables at that time. Under terms of the deal, Target will continue to control all aspects of creating and implementing its financial services strategy, provided that future portfolio performance remains sufficiently strong. Alternatively, in the event that substantial unanticipated portfolio deterioration were to occur in the future, Chase would gain certain rights to direct Target’s credit card team to implement alternative underwriting and risk management practices, until portfolio performance improved. The transaction is expected to close before the end of May.
Discover Financial Services reported its U.S. Card segment produced solid results in the first quarter with pretax income of $375 million, down 6% from 1Q/07, as higher provision for loan losses was largely offset by increased net interest income and other income. U.S. Card managed loans grew to $47.5 billion, up 2% from last year driven primarily by a 5% increase in sales volume. The first quarter U.S. Card managed credit card net charge-off rate was 4.37% and the managed over 30 days delinquency rate was 3.93%, up 51 basis points and 62 basis points, respectively, from last year. Third-Party Payment debit and credit volume was $26.3 billion for the first quarter, 24% above last year. For more details on Discover’s first quarter performance visit CardData.com.
U.S. Bancorp reported that its second quarter merchant acquiring volume grew more than 30% over 2Q/05 to $56.1 billion, produced from more than 836,000 merchants. Debit card volume surged by 19% and corporate credit card volume increased 13% during 2Q/06, compared to one-year ago. Debit card volume was $7.141 billion for the second quarter compared to $5.991 billion for 2Q/05. Consumer credit card volume for the quarter was $9.473 billion, up 8% over 2Q/05. Corporate credit card volume was $7.744 billion, compared to $6.870 billion for the year-ago quarter. For the quarter, U.S. Bancorp’s Payment Services net income was up 37% to $251 million. For complete details on US Bancorp’s 2Q/06 performance, visit CardData ([www.carddata.com][1]).
MERCHANT ACQUIRING VOLUME HISTORICAL
4Q/03: $27,447,000,000
1Q/04: $27,335,000,000
2Q/04: $33,646,000,000
3Q/04: $39,385,000,000
4Q/04: $39,891,000,000
1Q/05: $39,477,000,000
2Q/05: $43,231,000,000
3Q/05: $44,600,000,000
4Q/05: $43,640,000,000
1Q/06: $49,222,000,000
2Q/06: $56,056,000,000
Source: CardData (www.carddata.com)
[1]: http://www.carddata.com
U.S. Bancorp reported that its fourth quarter merchant acquiring volume grew more than 9% over 4Q/04 to $43.6 billion, produced from more than 712,000 merchants. Debit card volume surged by 20% and corporate credit card volume increased 21% during 4Q/05, compared to one-year ago. Debit card volume was $6.661 billion for the fourth quarter compared to $5.548 billion for 4Q/04. Consumer credit card volume for the quarter was $9.207 billion, up 5.3% over 4Q/04. Corporate credit card volume was $7.102 billion, compared to $5.871 billion for the year-ago quarter. For the quarter, U.S. Bancorp’s Payment Services net income was down about 8% to $166 million due to increased bankruptcy filings. For complete details on US Bancorp’s 4Q/05 performance, visit CardData ([www.carddata.com][1]).
MERCHANT ACQUIRING VOLUME HISTORICAL
4Q/03: $27,447,000,000
1Q/04: $27,335,000,000
2Q/04: $33,646,000,000
3Q/04: $39,385,000,000
4Q/04: $39,891,000,000
1Q/05: $39,477,000,000
2Q/05: $43,231,000,000
3Q/05: $44,600,000,000
4Q/05: $43,600,000,000
Source: CardData (www.carddata.com)
[1]: http://www.carddata.com
U.S. Bancorp reported that its third quarter merchant acquiring volume grew nearly 13% over 3Q/04 to $44.6 billion, produced from more than 744,000 merchants. Debit card volume surged by 23.0% and corporate credit card volume increased 24.5% during 3Q/05, compared to one-year ago. Debit card volume was $6.164 billion for the third quarter compared to $5.006 billion for 3Q/04. Consumer credit card volume for the quarter was $8.917 billion, up 8.6% over 3Q/04. Corporate credit card volume was $7.626 billion, compared to $6.124 billion for the year-ago quarter. For the quarter, U.S. Bancorp’s Payment Services net income was up about 25% to $207 million. For complete details on US Bancorp’s 3Q/05 performance, visit CardData ([www.carddata.com][1]).
MERCHANT ACQUIRING VOLUME HISTORICAL
2Q/03: $26,432,000,000
3Q/03: $27,995,000,000
4Q/03: $27,447,000,000
1Q/04: $27,335,000,000
2Q/04: $33,646,000,000
3Q/04: $39,385,000,000
4Q/04: $39,891,000,000
1Q/05: $39,477,000,000
2Q/05: $43,231,000,000
3Q/05: $44,600,000,000
Source: CardData (www.carddata.com)
[1]: http://www.carddata.com
Wright Express reported revenues for the first quarter rose 20% to $52.2 million. Total transactions processed increased 7% from the first quarter of 2004 to 52.5 million. Payment processing transactions increased 8% to 37.4 million, and transaction processing transactions increased 5% to 15.1 million. Total MasterCard purchase volume grew to $255.4 million, an increase of 37% from the comparable period a year ago. For complete details on Wright Express’ first quarter performance, visit CardData ([www.carddata.com][1]).
[1]: http://www.carddata.com
The Federal Reserve Board issued a final rule which revises the official staff commentary to Regulation Z. The revisions state the rules for disclosing fees to expedite a payment or delivery of a card. The revisions also interpret the rules for replacing an accepted credit card to permit an issuer, under certain conditions, to replace an accepted card with more than one card. The FRB staff finds that expedited payment fees are not finance charges under TILA and Regulation Z because the consumer has a reasonable means for making payment on the account without paying a fee to the creditor. The FRB staff also plans to recommend the amending of the rules to allow the unsolicited issuance of additional cards on an existing account outside of renewal or substitution under certain conditions. Furthermore, the FRB staff may consider whether changes to Regulation E’s restrictions on the unsolicited issuance of additional debit cards on a consumer’s existing asset account are warranted. The revisions will be effective April 1st with mandatory compliance required by October 1st.