Fair lending analysis of credit cards
This paper discusses some of the key fair lending risks that can arise in various stages of the marketing, acquisition, and management of credit card accounts, and the analysis that can be employed to manage such risks. The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B prohibit discrimination in all aspects of credit transactions and include specific provisions relating to processes that employ credit scoring models. This paper discusses some of the areas of credit card operations that may be assessed in an effort to manage the risk of noncompliance with fair lending ...
Consumer testing informs policy: overdraft regulation as a case study
In November 2009, the Board of Governors of the Federal Reserve System issued regulations that protect consumers from being charged certain fees when, under a discretionary overdraft service, financial institutions pay transactions from a deposit account that contains insufficient funds. Under the regulations, consumers must receive notices that explain any discretionary overdraft services offered to them by their bank. In addition, consumers may not be charged overdraft fees for ATM or one-time debit transactions unless they have opted in to this service. During the rulemaking process, the ...
Consumer credit counseling: credit card issuers' perspectives
On Friday, May 23, 2003, the Payment Cards Center hosted a workshop led by collections managers from J.P. Morgan Chase and Juniper Bank. The managers provided the credit card issuers' perspective on the consumer credit counseling industry. The day's discussion complemented an earlier workshop at which representatives from local consumer credit counseling services (CCCS) discussed their business model. After describing the ways in which new market entrants have affected the counseling industry, the issuers discussed the challenges associated with administering and appropriately valuing the ...
Moving into the Mainstream: Who Graduates from Secured Credit Card Programs?
Secured credit cards--credit cards whose limit is fully or partially collateralized by a bank deposit--are considered a gateway product to mainstream credit access. As consumers demonstrate good usage and repayment behavior, they may be offered the opportunity to graduate to an unsecured credit card. This paper uses anonymized account-level data to examine the prevalence of account graduation in the secured credit card market since 2012. Using a fixed effects regression model, we identify a set of usage and repayment behaviors that are correlated with account graduation.
Consumer Payment Preferences and the Impact of Technology and Regulation: Insights from the Visa Payment Panel Study
The Consumer Finance Institute hosted a workshop in August 2018 featuring Michael Marx, senior director at Visa, Inc., to discuss recent data from the Visa Payment Panel, highlighting the evolution of consumer payment preferences since the Great Recession and the passage of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. A number of intriguing trends were discussed. Debit card adoption and growth have shown signs of slowing, even as regulatory changes have increased its prevalence recently among younger consumers. Credit card usage continues to grow and has ...
General-use prepaid cards: the path to gaining mainstream acceptance
Following the rapid proliferation of merchant-issued prepaid gift cards, some people assumed that the added functionality available in network-branded prepaid cards would lead to similar early success for these payment vehicles. While a number of emerging applications are gaining traction, others are struggling to reach viable scale. This paper argues that the rich functionality creates a significant ?cost hurdle? that must be overcome with economically viable solutions. The paper identifies two emerging strategies that hold particular promise: 1) developing applications that efficiently ...
Innovation in financial services and payments
Rapid innovation is changing the array of financial services and payment options available to customers. To examine the driving forces behind the surge of innovation and the adoption of new technology, the Payment Cards Center and the Research Department of the Federal Reserve Bank of Philadelphia hosted a conference on ?Innovation in Financial Services and Payments? on May 16-17 of this year. ; This document provides a summary of the presentations and discussions during the two day conference event.
Trends and preferences in consumer payments: updates from the visa payment panel study
Michael Marx, senior director, Visa Research Insights, conducted a workshop in 2009 at the Payment Cards Center (PCC) as the economy was emerging from a recession. At that time, it appeared that the recession had affected consumer payment preferences, especially those related to cash and credit cards. To get an update on consumers? use of the various payment methods, the PCC invited Marx to facilitate another workshop in 2014. More recent findings from the Visa Payment Panel Study reveal declines in cash use ? a return to the long-term trend ? and increases in credit card use, perhaps ...
Meeting the demand for debt relief
Each year, millions of financially distressed consumers in the U.S. face a difficult choice among the debt relief options available to them. This paper describes the options available to borrowers who seek assistance in managing their debts and discusses the information and incentive problems associated with these options. It also reviews the trends that contributed to the breakdown of the repayment framework and the responses to these trends. Among the responses is a reconsideration of the regulatory structure of the debt relief industry. The paper concludes with a discussion of the ...
Deconstructing Mechanic’s Liens
In this paper, we examine a new data set composed of mechanic’s lien complaints filed in the First Judicial District of Pennsylvania (Philadelphia County). Over a 10-year period, 426 mechanic’s liens were filed against 398 single-family properties, which is less than 0.1 percent of single-family properties in Philadelphia. The lien properties in our data set tend to be more expensive, newer, and larger than non-lien properties. About 80 percent of mechanic’s liens are filed by general contractors, with the remainder pursued by a subcontractor. Notably, a 2014 change in Pennsylvania law ...