Credit Card Issuers Gradually Ease Lending to Consumer
For the second straight week, there are signs that the financial outlook for credit card issuers is improving.
Last week, credit card issuers reported defaults and late payments had dropped to pre-recession levels. This week, a new survey by the Office of the Comptroller of the Currency shows that some banks are gradually easing lending standards on credit cards.
According to the Survey of Credit Underwriting Practices 2011:
* 25 percent of 16 banks offering credit cards eased their underwriting standards through reducing credit score cutoffs and increasing credit limits. This is the first time that credit card underwriting standards have loosened since 2008. The study says this was caused by economic outlook, competition, strategy, and government regulations.
* 44 percent of the banks that offer credit cards tightened underwriting standards, but this was down from 81 percent last year. 31 percent left the standards unchanged.
* Credit risk in card portfolios increased in only 6 percent of banks compared with 94 percent in the 2010 survey. Credit risk decreased in 69 percent of the banks. The study says this drop in credit risk is due to conservative lending, an improvement in the economy, and a drop in defaults and late payments.
The 17th annual survey covers the 12-month period ending February 28, 2011. It examines assets and underwriting standards at 54 of the largest national banks with assets of $3 billion or more.
Link to Survey of Credit Underwriting Practices 2011: