CFPB Sees Stable Credit Card Market, Slower Growth for Subprime

The Consumer Financial Protection Bureau released its 2025 Consumer Credit Card Market Report, which views how the card market performed through the end of 2024.

While the CFPB reported that the total amount of money borrowed using credit cards reached an all-time high, delinquency rates peaked in the first quarter of 2024 and have been decreasing to levels that are comparable to those seen before the COVID-19 pandemic.

Lenders that exclusively issue subprime credit cards are not expected to reach their potential based on the CFPB’s report, as the CFPB views signs of stability, rather than growth, in the card market. The biennial study is required under the CARD Act. It tracks balances, prices, fees, disputes, and access for the entire credit spectrum.

Although the CFPB report did not specifically identify the existence of growth within the subprime lending segment, it did recognize a widening disparity between the performance of prime and subprime borrowers over the last few years.

Much of the growth in credit card debt was attributed to the spending and borrowing habits of high-score borrowers.

The CFPB noted that delinquency rates — a measurement of how many accounts are late in paying — increased during the first quarter of 2024, but then began trending down and eventually returned to pre-pandemic levels.

Trends such as this are positive news to subprime lenders as they represent a normalizing of delinquency trends — rather than an escalation of credit stress.

During the last few years, many subprime lenders tightened their underwriting criteria due to rising inflation and interest rates — which strained many household budgets — and now these lenders are starting to see the benefits of those tighter underwriting criteria reflected in improved delinquency performance.

That’s why subprime lenders are no longer concerned about experiencing a sudden, dramatic decline in the performance of their portfolios. Instead, they are focusing on identifying incremental ways to improve performance, as opposed to solely minimizing losses.

Subprime lenders are shifting their focus from loss containment, which is a focus on preventing a decline in business performance, to controlled optimization, which is a focus on improving performance and profitability, rather than simply preventing a decline in business performance.

Although the CFPB report indicated that total credit card balances hit new highs in 2024, the majority of the growth in total credit card balances was generated by the spending and borrowing habits of prime borrowers.

In contrast, subprime borrowers and deep subprime borrowers experienced slower growth in the total dollar value of their credit card balances and were less aggressive in their use of credit.

There are two sides to the slower growth in credit card balances by subprime borrowers.

From the perspective of subprime issuers, the slower growth in credit card balances and spending by subprime borrowers could potentially limit the opportunities for revenue growth, as the majority of revenue generated by issuers comes from revolving balances.

For subprime issuers, the CFPB report presents an environment that encourages patience. Issuers with strategies centered on rapidly increasing lines of credit or aggressively acquiring new customers are likely to see significant challenges.

Subprime issuers may want to gradually increase their credit lines, develop collateralized products, and help borrowers improve their credit profiles.

Higher interest rates will only add to this sensitivity. Even relatively modest amounts of interest expense can develop into significant finance charges when balances grow because of the nature of interest expense. That can lead to disputes or dissatisfaction with borrowers.

The report has continued to document ongoing dispute activity, which can lead to resource consumption and additional compliance costs for issuers.

The continued documentation of ongoing dispute activity by the CFPB reinforces to subprime issuers, the need for issuers to establish clear communication channels and provide accurate and timely disclosures regarding their credit products.

The best way for subprime issuers to minimize disputes and related costs is to develop transparent and predictable fee structures, along with straightforward and well-defined dispute resolution processes.

Generally, the CFPB’s findings indicate that the U.S. credit market is stable, but highly selective.

Credit stress is no longer worsening; however, growth in the credit market remains uneven — largely driven by the credit-related spending and borrowing habits of prime borrowers, and conservatively driven by the spending and borrowing habits of subprime borrowers.

For issuers that specialize in the subprime space, the CFPB report provides a message that is quite different than what was conveyed by many of the industry’s previous growth cycles.

Rather than pursuing volume for the sake of volume itself, issuers should focus on implementing prudent underwriting practices, maintaining strong servicing capabilities, and creating credit products that properly reflect the financial capacity of their borrowers — rather than attempting to maximize profit margins.

The CFPB report indicates a more stable credit environment. There are fewer red flags waving warnings for subprime issuers. The data shows that issuers would be wise to implement a measured — rather than a rapid — approach to expansion.