Bloomberg Businessweek: Banks Are Handing Out Beefed-Up Credit Lines No One Asked For

Bloomberg Businessweek, January 23, 2020: Banks are handing out beefed-up credit lines no one asked for

Whatever the case, the immediate result is clear: debt, and lots of it. Outstanding card borrowing has surpassed its pre-crisis peak, reaching a record of $880 billion at the end of September, according to the latest data from the New York Fed’s consumer credit panel. That’s boosting profit at top lenders like Capital One, JPMorgan and Citigroup Inc. a decade after banks cut credit limits without warning during the crunch.

Proactive credit line increases, known in the industry as PCLIs, emerged in the 1990s but virtually disappeared after regulators clamped down on the practice following the 2008 financial crisis. But as banks struggled to ramp up lending, PCLIs made a comeback with executives finding more aggressive ways to work within the consumer-protection laws.

Subprime and near-prime customers got increases at a higher-than-average pace, according to the agency. That means many of the people getting boosts have blemished or limited histories of paying bills.

Credit cards have historically been banks’ highest-yielding loans. With interest rates on credit card balances reaching the highest level in more than two decades last year, U.S. issuers pulled in $179 billion from interest and fees, leading to the most profitable year on record, according to data from payment consultants R.K. Hammer. In addition to Capital One, JPMorgan and Citigroup, top card lenders include American Express Co. and Discover Financial Services.

Younger borrowers are hurting the most. The number of cardholders between the ages of 18 and 29 at least 90 days behind on payments has reached the highest level in almost 10 years, according to the Federal Reserve Bank of New York.

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Redlining and Neighborhood Health

Before the pandemic devastated minority communities, banks and government officials starved them of capital.

Lower-income and minority neighborhoods that were intentionally cut off from lending and investment decades ago today suffer not only from reduced wealth and greater poverty, but from lower life expectancy and higher prevalence of chronic diseases that are risk factors for poor outcomes from COVID-19, a new study shows.

The new study, from the National Community Reinvestment Coalition (NCRC) with researchers from the University of Wisconsin–Milwaukee Joseph J. Zilber School of Public Health and the University of Richmond’s Digital Scholarship Lab, compared 1930’s maps of government-sanctioned lending discrimination zones with current census and public health data.

Table of Content

  • Executive Summary
  • Introduction
  • Redlining, the HOLC Maps and Segregation
  • Segregation, Public Health and COVID-19
  • Methods
  • Results
  • Discussion
  • Conclusion and Policy Recommendations
  • Citations
  • Appendix

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