Payments

The median interest rate that large credit card issuers charged consumers with good credit in the first half of 2023 was 28.2%, compared with 18.15% at smaller banks and credit unions, according to a study by the Consumer Financial Protection Bureau, which is on a campaign against excessive fees.

Financially stressed consumers nearing their credit limit use buy now/pay later loans to finance smaller purchases, while wealthier households want to avoid paying interest or carrying a balance on credit cards for bigger-ticket items, according to the New York Fed.

Shared services organizations PSCU and Co-op Solutions are offering post-purchase buy now/pay later loans, with the goal of reaching consumers who are concerned about managing their credit.

The stable outlook is an indication that — at least for some lenders — the much-feared cycle of cardholders defaulting on their obligations in the wake of the COVID-19 pandemic may not turn out to be so bad.

The collateral has a high principal payment rate, 63.1%, for the eleven months ended November 2023. It also had payment rates of 66.7% and 59.0% for the twelve-month averages for 2022 and 2021, respectively.

The AAA ratings also stem from a 5.5% base-case loss rate, a 22.5% base-case payment rate, a 15.0% base-case yield, and a 3.0% purchase rate assumption.

In comments submitted to the Consumer Financial Protection Bureau concerning its "large participant" rule governing Big Tech in payments, many commenters outlined procedural concerns, suggesting there may be grounds for litigation when the rule is finalized.

Despite tougher economic conditions, BNPL lenders are driving growth by expanding to new audiences and checkout channels, as well as fine-tuning proprietary risk-management models.

The A1 and A2 notes have a revolving period during which investors will receive fixed-rate and floating-rate payments, respectively.

A tightening economy plus an aggressive start to fourth quarter shopping will put firms' underwriting decisions under the microscope as regulators' concerns mount.