After the frightening and painful experiences of 2008 and 2009, it is a pleasure to see some of the first green shoots of economic recovery in 2010. The economy is finally creating enough jobs to reduce the unemployment rate, but it will take some time before we approach full employment.* Home prices have stabilized in most areas of the country, and sales have increased. But we are still far from describing the U.S. housing sector as normal.
The damage to consumers’ balance sheets caused by the financial crisis and resulting recession will take some time to repair. At present, about 7 million American consumers are seriously delinquent on at least one financial debt — more than twice the long-term average. It is tempting to attribute this increase to mortgage defaults, but credit card charge-offs are also very high, hovering around 10 percent in recent quarters. The total dollar value of credit card lines, as well as the number of open accounts, has fallen by about one-quarter from 2008 levels.
This leads to an important set of questions for the future: Who will obtain what kinds of credit, from whom, and at what price? Another important question is: How will the millions of distressed consumers who don’t file for bankruptcy repay or renegotiate their delinquent debts?
These areas are an important focus of our research agenda, and we organized our recent workshops with these questions in mind. One workshop, held in January, considered the role consumer testing played in the Federal Reserve Board’s rulemaking on overdraft services. Interviews with consumers improved understanding about the ways in which they use overdraft services, their understanding of these services, and the prices paid for them. Another workshop in March highlighted the FDIC’s recent research on under-banked consumers. One area that the FDIC has focused on is the costs of deposit accounts, which, for many reasons, consumers may not anticipate as well as they need to.
Our most recent conferences focused on timely issues. In February, we examined the latest developments in payment card fraud and some proposed responses to better protect privately owned electronic consumer payment systems. An important question raised at the conference was the role the government could or should play in facilitating the evaluation and mitigation of fraud risk in consumer payments. Our April conference used the example of prepaid cards to illustrate the rapid evolution of consumer payments. Representatives from prepaid issuers, policymakers, and consumer groups discussed how the prepaid card market has changed in recent years and how new regulations are likely to affect these products and the consumers who use them.
Another important focus for us is the collection of more relevant data to facilitate higher quality research and also to present data in ways that are clearer and more accessible to everyone. The first effort will be facilitated by the latest addition to our staff, Avi Peled, who is our new data manager. The second effort is exemplified by our new web pages, called Consumer Credit and Payments Snapshots, developed by center staff member James VanOpstal and the Bank’s web team. Although these pages were posted only in January, they have already become a popular landing place for anyone interested in the most basic statistics on consumer payments and credit.
As we approach our 10th anniversary, we see many opportunities to continue our research and programming in the rapidly evolving world of consumer credit and payments. While we are extremely proud of our accomplishments so far, we recognize that we are living in very special times. These times call for extraordinary efforts and insights. With your help, we will do our best to meet these challenges.