| Quote of the Month:
"It appears that the credit quality improvements enjoyed by issuers since 1997 have finally played out. December marked the first time in three years that the delinquency rate on credit cards failed to improve from its year-earlier level."
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March 2001
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| Recession Can Still Be Avoided But Plunging Confidence is Dampening Growth |
| The latest (February) survey of professional forecasters conducted by Blue Chip Economic Indicators found that only 5% thought the U.S. economy was currently in a recession, but the panel has sharply reduced their growth forecasts for 2001from 3.6% in October to 2.6% in January to 2.1% by the latest survey. The consensus forecast for growth in the first quarter of 2001 was just 0.8%.
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| Credit Card Delinquencies are Rising
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| It appears that the credit quality improvements enjoyed by issuers since 1997 have finally played out. December marked the first time in three years that the delinquency rate on credit cards failed to improve from its year-earlier level. |
| Bankruptcies Are Up Sharply in the New Year
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| Visa's Bankruptcy Notification Service tracks weekly filings for personal bankruptcy in courts across the country. In the first six weeks of 2001 (as of February 11, 2001), 139,358 petitions had been filed in U.S. bankruptcy courts, up a whopping 24.7% from the 111,747 petitions filed during the first six weeks of 2000. |
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| Amex Co-Brands |
| American Express and 7-Eleven have introduced a co-branded, prepaid Internet shopping card. The convenience store operates more than 5,200 stores in the U.S. The card is not available in 7-Eleven's 490 Canadian stores. Although the card can be used at the stores, the primary purpose of the card is to give customers a means of making purchases on the Internet. |
| Citibank Cobrands with Travelocity |
| Citibank will be issuing a new co-branded MasterCard product with Travelocity, the Ft. Worth, Texas-based online provider of travel services. Travelocity has more than 26 million registered members. The new card will be called the Travelocity.com World MasterCard. |
| Further Consolidation of Bank Cards |
| There appears to be a growing number of commercial banks that are abandoning the credit card business. A recent case in point is the announcement by the Wachovia Corporation that it may sell its credit card portfolio. |
| New Financial Products From Non-Traditional Sources |
| In previous issues we have reported non-traditional players getting into the borrowing and lending business. This process seems to have accelerated over the past year as some familiar brand names have begun to cross-sell financial products to their large customer bases. |
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| Automobile Lending by Commercial Banks |
| The Report of Condition and Income for all commercial and savings banks provides a wealth of detailed information on the installment lending activities of 9,122 of these banks for the year ending December 1999. These data are supplemented by the annual installment lending survey of the American Bankers Association. |
| Checked Your Credit Score Recently? |
| About the time this issue of Spotlight is available, you will be able to learn your credit score and gain some insight into how it is calculated. Credit scores are widely used in granting consumer credit and residential mortgage loans. |
| Internet Car Retailing |
| As with financial services, the Internet is changing the way consumers buy cars. A new study published by the National Bureau of Economic Research (NBER) finds that "Buyers who use an Internet referral service save about 2 percent on their average new car purchase." |
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| Do Consumers Really Want Credit Card Reform? |
| With new sessions of state legislatures and the U.S. Congress underway, let us anticipate some of the credit card legislation that may tempt legislators. Two types of charges on cardholders are likely to come under legislative assault at some point: (1) Special charges on cardholders who repay their accounts in full each month; and (2) "High" finance charges on unpaid balances. |
| FRB Seeks Comments on Proposed Predatory Lending Regs |
| On December 13, 2000 the Federal Reserve Board issued a four part proposal intended to restrict "predatory lending" practices. By modifying Regulation Z, the proposal relies heavily on additional disclosures to discourage lenders from engaging in certain tactics or including particularly onerous features in their mortgage loan products. The Fed is seeking comments on the proposed regulations through mid-March. |
| Regulators Offer New Subprime Definition | | In the ongoing debate over subprime loans and predatory lending practices, a working definition of either has been noticeably absent. In early February, Federal banking regulators issued new examination guidelines that further clarify what they view as subprime lending. |
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