Sub-Prime Loans Growing
ATLANTA-Sub-prime origination growth across all lending sectors continues with notable increases, according to U.S. consumer data in Equifax's March "National Consumer Credit Trends Report," a joint product of Equifax and Moody's Analytics.
The number of bank credit card accounts increased from December 2010 to December 2011, which the companies said was a product of lenders more aggressively seeking new customers and consumers' increasing demand for new credit.
New credit in 2011 ($782 billion) remained below pre-recession levels, but gained more than 10% over 2009 and 2010 levels.
Total retail credit card limits increased 6% year over year from December 2010 to December 2011 and total bank credit card limits jumped 24% from December 2010 to December 2011. Consumer finance credit limits also saw a comparatively modest improvement of $1.2 billion from Dec. 2010 to Dec. 2011.
Total consumer debt in the U.S. currently stands at $11 trillion, a decrease of 11% from its peak in Q4 2008 at $12.4 trillion. The drop is driven by a nearly 12% drop in home financing balances. After reaching a post-recession low of $1.6 trillion in May 2011, consumer debt balances have risen about 2%.
Other notable findings include:
* Lending to sub-prime consumers showed a 41% increase from 2010 to 2011 as sub-prime borrowing hit a four-year high in December 2011 with 1.1-million new bank credit cards issued.
* New sub-prime card limits grew 55% to their highest level since 2008.
* Bank credit card growth continues, but is still well below pre-recession levels. In 2011 39.9 million bankcards were opened, an 18% increase from 2010 and the highest total since 2008.
* The increase in total bank credit card originations was accompanied by a 31% increase in total credit limits from 2010 to 2011.
For info: www.equifax.com
Cost Of Funds At Its Lowest
SAN ANSELMO, Calif.-The interest expense banks are paying for retail funds is now the lowest ever, according to analysis from Market Rates Insight.
In 2011, banks paid an average of $0.16 in interest expense on deposits for every $1 they earned in interest on loans. In 2007, prior to the last recession, banks paid an average of $0.51 in interest expense on deposits for every $1 they earned as interest on loans.
MRI said total interest income from loans at FDIC-insured institutions in 2007 was $725 billion, and total interest expense paid for deposits amounted to $372 billion, which is a cost of $0.51 in interest paid for every $1 of interest earned. In 2011, total interest income was $507 billion, and total interest expense paid for deposits amounted to $84 billion, which is a cost of $0.16 in interest paid for every $1 of interest earned. The 2011 cost of $0.16 is the lowest ever since the FDIC made such figures available in 1992.
For info: www.marketratesinsight.com
Financial Literacy Rate 'Disturbing'
WASHINGTON-Consumers displayed a "disturbing lack of basic financial skills that are critical to building a stable financial future" according to a recent survey by the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association.
In its sixth year, the groups said their Financial Literacy Survey annually provides data and trending around Americans' attitudes and behaviors related to personal finance.
The 2012 survey found:
* More than half of U.S. adults, 56%, admit that they do not have a budget
* One-third of U.S. adults do not pay all of their bills on time
* 39% of adults carry credit card debt over from month-to-month
* Two-in-five adults indicated they are now saving less than they were one year ago, and 39% do not have any non-retirement savings
* More than one-in-ten adults typically use prepaid debit cards to pay for everyday transactions, with 78% citing convenience as the driving factor.
* 73% percent use prepaid cards because they feel the cards are safer than carrying cash
* 72% utilize prepaid cards because it allows them not to overspend
* 56% find that the cards enable them to better manage their money.
For info: www.nfcc.org or www.nbpca.org
More Focus On Policies Needed
DES MOINES, Iowa-Incomplete or nonexistent policies can trigger a sequence of serious consequences, and potentially end a profitable product or service, according to a white paper authored by PolicyWorks Senior Compliance Officer Jami Weems.
"More than simply alerting examiners to a problem, insufficient policies expose a credit union to needless risk," writes Weems.
In an excerpt from her white paper, "In Turbulent Times, Credit Union Policies Are Life Preservers," Weems notes examiners operate under the premise that CUs are up-to-date on all current rules; therefore, they expect a CU's policies and procedures to be reflective of the current practices.
Weems recommends credit unions put together a plan for updating current policy manuals. This plan, she says, needs to detail how the credit union will make policymaking and maintenance a part of the credit union's overall strategic plan.
