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Financial Services Law Insights and Observations

CFPB examines pandemic effect on card limits

Federal Issues CFPB Covid-19 Credit Cards Consumer Credit Consumer Finance Consumer Credit Outcomes

Federal Issues

On August 11, the CFPB released findings regarding trends in credit card limits for consumers throughout the Covid-19 pandemic. The post—the fourth in a series documenting trends in consumer credit outcomes during the Covid-19 pandemic (the first covered by InfoBytes here)—examines whether “credit has tightened on existing credit card accounts” and if “financial institutions cut limits or closed accounts” during the pandemic. As previously covered by InfoBytes, last August, the Bureau issued a report examining trends through June 2020 in delinquency rates, payment assistance, credit access, and account balance measures, which showed that generally there was an overall decrease in delinquency rates since the start of the pandemic for auto loans, first-lien mortgages, student loans, and credit cards. According to the Bureau’s recent findings, starting in March 2020, credit limits for prime and near prime borrowers broke with their previous upward trend, largely flattened out, then began to grow more quickly for these groups in February 2021. Researchers also found that for subprime and deep subprime borrowers, there was nearly no change in credit limits, though the trend ticks upward toward the end of 2020. Additionally, the spike in accounts being closed early in the pandemic seems to have been short-lived because “[a]fter the spike in closures in May 2020, the total number of account closures declined through July and then returned to pre-COVID-19 levels through at least May of 2021.”

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