The subprime credit card business is beginning to bounce back to life after a six-year slump.
The number of new subprime accounts jumped to 1.695 million in the first quarter, up from 1.045 million in the same period a year earlier, according to data released Tuesday by the American Bankers Association.
The ABA also found that the 62% growth in new subprime credit card accounts in the first quarter easily outpaced 27% growth for prime accounts and 18% growth for super-prime accounts.
"A slight increase in subprime credit suggests that card companies see a long-term improvement in the U.S. economy, and are willing to assume slightly more risk in their portfolio," Kenneth Clayton, the ABA's chief counsel, said in a news release.
"However, it's important to remember that the industry's portfolio remains much more heavily weighted toward prime and super-prime accounts after the recession and regulatory changes that limit banks' ability to manage risk."
The subprime credit card business slumped sharply during the economic downturn, as banks looked to reduce the risk in their card portfolios. Another obstacle to the availability of subprime credit cards was the 2009 law known as the Card Act, which restricted certain fees that subprime card issuers had relied on.
In the first quarter of 2007, the card industry added 3 million new subprime accounts, but the growth numbers have since narrowed substantially. The first-quarter total between 2009 and 2013 never exceeded 1.5 million, according to the ABA.
The banking trade group relied on data from Argus Information & Advisory Services, which defines a subprime credit card as one that goes to a borrower with a credit score below 680.
Some observers are ringing alarm bells about the return of subprime lending and a sharp recent increase in total U.S. credit card debt. A study by CardHub found that Americans incurred more than $28 billion in new credit-card debt in the second quarter, a reversal from the first quarter, when consumers paid off $32.5 billion in card debt.
The ABA's report did not shed any new light on the second-quarter trends, because it looked at data from the first quarter, when consumer spending throughout much of the country was hurt by cold temperatures and unusually heavy snowfall.
During the first three months of the year, monthly purchase volume on subprime credit cards fell by 8.4%, when compared with the last three months of 2013, the ABA said.
"The economy rebounded strongly in Q2," the ABA's report stated, "and time will tell whether the card market will recover as quickly and robustly."
The ABA also found that the structure of subprime credit cards has evolved substantially since before the financial crisis, with cash rewards and airline miles becoming a far more common part of subprime card offers.
In the first quarter of 2007, 25% of new subprime account volume had some type of rewards, according to the ABA. That figure had risen to 58% by the first quarter of this year.