The country’s top 16 credit card underwriters have relaxed their lending standards for the first time in three years, according to the Office of the Comptroller of the Currency’s recently released 17th annual Survey of Credit Underwriting Practices.
This year’s survey reported some initial indications of commercial products loosening up for the first time since the underwriting standards began being tightened in 2008. In fact, one quarter of the banks backing credit cards loosened their underwriting standards in the 12 months the survey covers, the greatest relaxation of standards since 2002.
Of course, this conversely means that the survey found that 75% of the credit card underwriters either did not change their standards at all, or, in the case of banks with poorly performing products, actually tightened their underwriting standards.
Dave Wilson, Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner, said, “Some easing of standards is normal and healthy as the economic environment stabilizes. We need to remember that overly liberal underwriting standards contributed to extremely high credit losses. The pace of easing standards in products like leveraged lending is disconcerting and warrants close attention.”
Charles Tran, founder of CreditDonkey, agreeing with Wilson, said, “This is a healthy, early tentative step in the credit card industry’s recovery process. However, the banks need to remember what caused their losses in the first place, and the consumers need to approach acquiring consumer debt fully educated and with caution.”
The OCC’s survey covers 54 of the largest national banks for the 12-month period ending February 28, 2011. The banks it assesses represents approximately 94 percent of total loans in the national banking system.
Follow @CreditDonkey or write to Andrew Green at andrew@creditdonkey.com
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