Research and Statistics

Fed: banks ease grip on cards


Just as banks are finally lowering their barriers to credit card ownership, consumers aren’t so keen to accept them, says a new Fed survey of senior loan officers

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Banks loosened their grip on credit card loans slightly in the third quarter, while demand for new cards cooled off, according to the Federal Reserve’s survey of senior loan officers.

“A very few banks reported having eased their standards for approving applications for credit cards,” the Fed said in releasing results of the quarterly survey.

The senior loan officers survey provides a look at banks’ willingness to lend. The edition released in the year’s fourth quarter included comments on consumer loans from 76 U.S.-based banks.

Regarding credit cards, five of 57 banks that responded to the question said they “eased somewhat” their overall standards for approving card applications during the July-September period. None reported tightening their standards.

Seven of 51 banks saw “moderately stronger” demand for cards, while three said demand was “moderately weaker,” apart from normal seasonal fluctuations. In the previous quarter, 13 of 50 respondents saw stronger demand for cards.

Issuers clamped down hard on cards and credit limits during the recession, and have been gradually easing access as the economy slowly strengthens. In the survey released in August, banks leaned toward the view that lending standards for cards are still tighter than the average, looking at the period from 2005 to the present.

The Fed survey looks at changes in banks’ minimum credit scores, willingness to expand credit limits, minimum required payments, rates charged on outstanding balances and flexibility with borrowers whose credit score falls short of the bank’s minimum.

In the survey released Monday:

  • Four banks of 52 reduced the minimum credit score required for card applicants, and none increased the minimum score.
  • Five banks said they loosened their grip on credit limits somewhat, while one bank said it tightened limits somewhat.
  • Two banks said they hiked their rates relative to their cost of funds, while two said they reduced rates and 47 said they held the spread basically unchanged.
  • Two of 52 banks said they increased the minimum percent of outstanding balances that must be repaid monthly, while 50 reported no change.
  • Two of 52 banks eased somewhat their policy for granting credit cards to applicants who don’t meet scoring standards; none tightened that policy.

Banks’ mood toward credit card borrowers remained in line with other consumer loans, the Fed said, as attitudes toward home loans and consumer installment loans softened moderately.

The fourth-quarter survey included a special set of questions on subprime auto loans, the focus of concerns about a credit bubble. Most of the 19 respondents who make subprime auto loans said there has been little change in their loan terms, such as rates or required credit scores, in the past year, and they expect their policies will remain about the same in the year to come.

Earlier story:Banks loosening grip on credit cards, says Fed survey

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