A surprising occurrence is happening in the consumer credit markets. Bank card issuers are back in acquisition mode, enticing consumers with cash back, airline points and other incentives to get a share of their wallet. And while new account originations are nowhere near the levels seen in 2007, recent growth in new bank card accounts has been significant; 17.6% in Q1 2011 when compared to Q1 2010. So what is accounting for this resurgence in the credit card space while the economy is still trying to find its footing and credit is supposedly still difficult to come by for the average consumer? Whether good or bad, the economic crisis over the past few years appears to have improved consumers debt management behavior and card issuers have taken notice. Delinquency rates on bank cards are lower than at any time over the past five years and when compared to the start of 2009 when bank card delinquency was peaking; current performance has improved by over 40%. These figures have given bank card issuers the confidence to ease their underwriting standards and re-establish their acquisition strategies. What’s interesting however is the consumer segments that are driving this new growth. When analyzed by VantageScore, new credit card accounts are growing the fastest in the VantageScore D and F tiers with 46% and 53% increases year over year respectively. For comparison, VantageScore A and B tiers saw 5% and 1% increases during the same time period respectively.   And although VantageScore D and F represent less than 10% of new bank card origination volume ($ limits), it is still surprising to see such a disparity in growth rates between the risk categories. While this is a clear indication that card issuers are making credit more readily available for all consumer segments, it will be interesting to see if the debt management lessons learned over the past few years will stick and delinquency rates will continue to remain low. If these growth rates are any indication, the card issuers are counting on it.

TRMA’s recent Summer 2011 Conference in San Francisco was another great, insightful event. Experian’s own Greg Carmean gave a presentation regarding the issues involved in providing credit to small-business owners. I recently interviewed Greg to get his impressions about last month’s conference. KM: I’m speaking with Experian Program Manager, Greg Carmean, who spoke at TRMA’s Summer Conference. Hi, Greg. GC: Hi, Kathy. KM: Greg, I know I’ve interviewed you before, but can you please remind everyone what your role is here at Experian? GC: Sure, I’m a Program Manager on the Small Business Credit Share side. I work with small- and medium-size companies, including telecom and cable companies, to reduce credit risk and get more value from their data. KM: Thanks, Greg. So last month, you spoke at TRMA’s Summer Conference. What did you discuss? GC: My presentation was entitled, “Beyond Consumer Credit – Providing a More Comprehensive Assessment of Small-Business Owners.” I talked about how traditional risk management tools can provide a point-in-time look at a business owner, but often fail to show the broader picture of the risk associated with all of their current and previous businesses. There is 3-4 times more fraud in small business than in consumer. Business identity theft has become a bigger issue, Tax ID verification is a common problem, and there’s a lot of concern about agents bringing in fraudulent accounts. KM: Why did you choose this particular topic?   GC: Well, Kathy, small business is seen as a large area of opportunity, but there can be a lot of difficulty involved in validation, especially when it comes to remote authentication and new businesses. KM: Would you say there’s more fraud in small business than on the consumer side? GC: Believe it or not, there is 3-4 times more fraud in small business than in consumer. Business identity theft has become a bigger issue, Tax ID verification is a common problem, and there’s a lot of concern about agents bringing in fraudulent accounts. Many telecom and cable companies are beginning to adopt more aggressive, manual processes to lower the risk of fraud. Unfortunately, that usually results in lower activation. KM: What can be done about it?   GC: Many telecom and cable companies are beginning to adopt more aggressive, manual processes to lower the risk of fraud. Unfortunately, that usually results in lower activation. KM: Sounds like it can be frustrating! GC: It can be, especially for the salespeople who bring in an account, and then find it’s not approved for service. Sometimes clients will pass a fraud check, but not a credit check. One of the topics I touched on is better tools that more accurately identify a small business owner's risk across all of their current and previous businesses to alleviate some of these problems. KM: Is there anything else telecom and cable companies should be doing? GC: I think the best risk-mitigation tool when it comes to account acquisition is leveraging information about both the small business and its owner. As they say, knowledge is power. KM: Definitely! Thanks again for your time today, Greg. Share your thoughts! If you attended TRMA’s Summer Conference, and especially if you attended Greg Carmean’s session, we’d love to hear from you. Please share your thoughts by commenting on this blog post. All of us at Experian look forward to seeing you at TRMA’s Fall Conference in Dallas, Texas, on September 20 – 21, 2011.

By: Staci Baker The Durbin Amendment, according to Wikipedia, gave the Federal Reserve the power to regulate debit card interchange fees. The amendment, which will have a profound impact on banks, merchants and anyone who holds a debit card will take effect on October 1, 2011 rather than the originally announced July 21, 2011, which will allow banks additional time to implement the new regulations. The Durbin Amendment states that card networks, such as Visa and Mastercard, will include an interchange fee of 21 cents per transaction, and must allow debit cards to be processed on at least two independent networks. This will cost banks roughly $9.4 billion annually according to CardHub.com. As stipulated in the Amendment, institutions with less than $10 billion in assets are exempt from the cap. In preparation for the Durbin Amendment, several banks have begun to impose new fees on checking accounts, end reward programs, raise minimum balance requirements and have threatened to cap transaction amounts for debit card transactions at $50 to $100 in order to recoup some of the earnings they are expected to lose. These new regulations will be a blow to already hurting consumers as their out of wallet expenses keep increasing. As you can see, The Durbin Amendment, which is meant to help consumers, will instead have the cost from the loss of interchange fees passed along in other forms. And, the loss of revenue will greatly impact the bottom line of banking institutions. Who will be the bigger winner with this new amendment – the consumer, merchants or the banks? Will banks be able to lower the cost of credit to an amount that will entice consumers away from their debit cards and to use their credit cards again? I think it is still far too soon to tell. But, I think over the next few months, we will see consumers use payment methods in a new way as both consumers and banks come to a middle ground that will minimize risk levels for all parties. Consumers will still need to shop and bankers will still need their tools utilized. What are you doing to prepare for The Durbin Amendment?