CFPB: Credit card debt dropped, digital engagement rose during pandemic; bureau looking to issuers for continued service improvements

Growth in the consumer credit card market in recent years reversed itself in 2020, with credit card debt falling to $811 billion by the second quarter of 2020 from a 2019 peak of $926 billion before it reached $825 billion by year-end, the consumer financial protection agency said in a report Wednesday.

In its most recent biennial report on the state of the consumer credit card market, the Consumer Financial Protection Bureau (CFPB) said that more than 25 million consumer credit card accounts representing approximately $68 billion in outstanding credit card debt entered relief programs in 2020, figures vastly higher than in prior years.

Among other indicators related to consumer credit card activity during the pandemic, it noted:

  • The share of accounts with a revolving balance declined in 2020, more consumers paid down their card debt in 2020, and existing cardholders paid off the highest share of their credit card debt in recent years;
  • Total credit line across all consumer credit cards fell slightly in 2020 from a post-Great Recession high of over $4.5 trillion in 2019 but remained above 2018 levels;
  • Application volume for credit cards decreased sharply in 2020 from its peak level in 2019, with approval rates also falling but not as markedly;
  • Late payment and default rates have fallen to historic lows, most notably for consumers with below-prime scores;
  • Consumers with below prime scores saw the greatest constriction in available credit card line, even as utilization of that line fell;
  • Digital engagement – whether reflected in enrollment in online portals, enrollment in mobile apps, opt-in rates to e-statements over paper equivalents, or electronic payment of credit card bills – is growing consistently across all age groups and nearly every platform type; and
  • Credit card issuers continued to make fewer debt collection phone calls for delinquent credit card accounts while increasing the use of emails in collection.

CFPB Acting Director Dave Uejio noted the role of public and private programs that helped consumers reduce their card debt during the pandemic. Now, he said, the bureau will be using “all our tools to support an equitable recovery” as these programs end.

The bureau noted two significant impacts on card issuers of the pandemic-driven economic crisis: credit card issuers’ operational models suddenly became untenable, necessitating a drastic and rapid shift to new ways of doing business; and the widespread end to much in-person activity sparked “the swiftest deterioration in economic conditions in modern history, imperiling the ability of millions of consumers to make adequate, timely payments of their debts.”

While the bureau notes a need for continued improvement in customer service and system reliability, it also gives a nod to issuers’ efforts to address the pressures of meeting consumers’ needs during the crisis. “With regard to issuers’ operational posture, issuers moved quickly to adjust operations in response to the new conditions precipitated by COVID-19; while issuers generally responded similarly in some ways (e.g., shifting employees to remote work wherever possible), their mitigation attempts varied more in others (e.g., existing credit line management),” the report notes. “Issuers struggled to maintain existing levels of account servicing, especially at the onset of the pandemic. Issuers’ relief efforts likely resulted in consumers preserving billions of dollars in liquidity following, and especially immediately following, the onset of the pandemic.”

The CFPB issued Wednesday’s report under the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). It’s the fifth such report form the bureau since responsibility for it was transferred from the Federal Reserve Board to the CFPB under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank).

CFPB Report Finds Declines in Credit Card Debt, New Applications and Increases in Digital Engagement in 2020