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Consumer Finance and Credit Consolidation - US - February 2010

This report examines the trends, outlook, and opportunities in the US market for unsecured consumer loans, including payday and pawn loans and other types of “alternative financial services” (AFS). It builds on several previous Mintel US studies, including Unsecured Loans—U.S., December 2005;Residential Mortgages and HELOCs—U.S., August 2008; and HELOCs and Other Lines of Credit—U.S., October 2009. This report estimates the size of the current marketplace, and analyzes the top players and their strategies. It looks at the major issues affecting the industry and analyzes their possible impact, including the state of the economy, the housing market, consumer and lender attitudes, and credit quality trends. It also examines the views of consumers who have trouble paying their debts. Recent trends in direct marketing are also examined. Most importantly, it offers suggestions on how lenders can succeed in a changing and difficult environment.

  • Unsecured lenders’ greatest competitive threats—home equity loans and mortgage refinances—are now largely tapped out and likely to remain so for years to come
  • The US home ownership rate has fallen to its lowest level in seven years and more and more consumers are becoming renters, meaning unsecured loans will be the only type of loan they will be able to obtain
  • The nation’s largest consumer finance branch network recently closed down, leaving a huge void—presenting an opportunity for other companies in the business
  • More than a third of consumers say they are having trouble paying their debts, creating an opportunity for lenders to offer these people potential financial solutions

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Table of contents

  1. Scope and Themes

    • Scope of this report
      • What you need to know
        • Data sources
          • Consumer survey data
            • Abbreviations and terms
              • Terms
                • Companies mentioned in this report
                • Executive Summary

                  • Industry overview
                    • Competitive context: The home equity threat dissolves
                      • Segment performance: Credit quality is bad and could get worse
                        • Regulatory threats: A new federal financial protection agency
                          • Leading companies and market size
                            • Market drivers: The ‘unbanked’ and ‘underbanked’
                              • Advertising and promotion
                                • The consumer—more than a third are having trouble paying debts
                                  • The consumer and debt assistance
                                  • Insights and Opportunities

                                    • Tapped-out home equity means more people will need unsecured loans
                                      • Closing of HSBC Finance creates a huge void in consumer finance space
                                        • Target market: 60 million people are unbanked or underbanked
                                          • Millions of people need help to rework their debt
                                          • Inspire Insights

                                              • Own, you say? No thanks
                                                • What's happening now
                                                  • The implications
                                                  • Market Size

                                                    • Key points
                                                      • Non-card unsecured debt: less than 5% of total consumer loans
                                                        • Figure 1: Total revolving and non-revolving consumer debt outstanding at banks, finance companies and credit unions, 2005-09
                                                      • Payday lending industry size
                                                      • Competitive Context One: Home Equity Threat Dissolving

                                                        • Key points
                                                          • Home loan threat vanishes, but many reluctant or unable to borrow
                                                            • U.S. savings rate jumps as the recession deepens
                                                              • Figure 2: U.S. consumer savings rate, January 2005-January 2009
                                                              • Figure 3: U.S residential mortgage debt, 2003-Q3 2009
                                                              • Figure 4: Homeowners’ share of equity plummets, 2004-Q3 2009
                                                            • Return to renting
                                                              • Figure 5: U.S. home ownership rate, 2004-Q3 2009
                                                          • Competitive Context Two: New Regulatory Threats

                                                            • Key points
                                                              • Proposed Federal Protection Agency’s 36% cap would end payday loans
                                                                • Increased state pressure on payday lenders
                                                                • Segment Performance: Credit Quality Is Bad and May Be Getting Worse

                                                                  • Key points
                                                                    • Consumer credit quality will remain weak
                                                                        • Figure 6: U.S. unemployment rate, January 2008-November 2009
                                                                      • Delinquency and charge-off figures continue to skyrocket
                                                                        • Personal bankruptcy filings climb back to pre-reform levels
                                                                          • Figure 7: Consumer loan delinquency rate, 2001-Q3 2009
                                                                          • Figure 8: Residential mortgage delinquency rate, 2004-Q3 2009
                                                                          • Figure 9: Consumer bankruptcies quarterly filings, 2000-09
                                                                      • Market Drivers: ‘Unbanked’ and ‘Underbanked’ are an Attractive Market Niche

                                                                        • Key points
                                                                          • FDIC: More than 25% of U.S. households are ‘unbanked’ or ‘underbanked’
                                                                              • Figure 10: Unbanked and underbanked households, by region, December 2009
                                                                            • Many banks just aren’t interested in serving this market
                                                                              • Underbanked more likely to use AFS-provided loan products
                                                                              • Leading Companies

                                                                                • Key points
                                                                                  • Banks and large finance companies
                                                                                    • Bank of America
                                                                                      • Capital One
                                                                                        • Citigroup
                                                                                          • Discover
                                                                                            • Wells Fargo
                                                                                              • American General Finance
                                                                                                • HSBC Finance
                                                                                                  • Payday lenders
                                                                                                    • ACE Cash Express
                                                                                                      • Advance America Cash Advance
                                                                                                        • Cash America
                                                                                                          • CompuCredit (Purpose Financial)
                                                                                                            • Dollar Financial Corp.
                                                                                                              • EZCORP (EZPAWN, EZMONEY)
                                                                                                                • First Cash Financial Services
                                                                                                                  • QC Holdings (Quik Cash)
                                                                                                                    • World Acceptance Corp.
                                                                                                                    • Advertising and Promotion

                                                                                                                      • Key points
                                                                                                                        • Mail volume drops, but payday lenders push email hard
                                                                                                                          • The differences among consumer borrowers
                                                                                                                            • Direct mail
                                                                                                                              • Figure 11: Bank of America direct mail ad, 2009
                                                                                                                              • Figure 12: Discover Financial Services direct mail ad, 2009
                                                                                                                              • Figure 13: National City Bank direct mail ad, 2009
                                                                                                                              • Figure 14: Beneficial Finance direct mail ad, 2009
                                                                                                                              • Figure 15: Household Finance direct mail ad, 2009
                                                                                                                              • Figure 16: American General Financial Services direct mail ad, 2009
                                                                                                                              • Figure 17: 1st Heritage Credit direct mail ad, 2009
                                                                                                                              • Figure 18: Worth Finance Corp. direct mail ad, 2009
                                                                                                                              • Figure 19: Tower Loan direct mail ad, 2009
                                                                                                                              • Figure 20: CashNetUSA direct mail ad, 2009
                                                                                                                              • Figure 21: ACE Cash Express email ad, 2009
                                                                                                                              • Figure 22: Advance America Cash Advance direct mail ad, 2009
                                                                                                                              • Figure 23: Allied Cash Advance direct mail ad, 2009
                                                                                                                              • Figure 24: Cash America direct mail ad, 2009
                                                                                                                          • The Credit Consumer

                                                                                                                            • Key points
                                                                                                                              • Who has had trouble paying bills?
                                                                                                                                  • Figure 25: Difficulty in paying debt in last two years, by gender, November/December 2009
                                                                                                                                  • Figure 26: Difficulty in paying debt in last two years, by age, November/December 2009
                                                                                                                                  • Figure 27: Difficulty in paying debt in last two years, by race/ethnicity, November/December 2009
                                                                                                                                  • Figure 28: Difficulty in paying debt in last two years, by household income, November/December 2009
                                                                                                                                  • Figure 29: Difficulty in paying debt in last two years, by employment status, November/December 2009
                                                                                                                                  • Figure 30: Difficulty in paying debt in last two years, by residential area, November/December 2009
                                                                                                                                • Consumers who seek debt relief
                                                                                                                                    • Figure 31: Contacted a lender, debt counseling agency, or debt consolidation service, by gender, November/December 2009
                                                                                                                                    • Figure 32: Contacted a lender, debt counseling agency, or debt consolidation service, by age, November/December 2009
                                                                                                                                    • Figure 33: Contacted a lender, debt counseling agency, or debt consolidation service, by race/ethnicity, November/December 2009
                                                                                                                                    • Figure 34: Contacted a lender, debt counseling agency, or debt consolidation service, by household income, November/December 2009
                                                                                                                                    • Figure 35: Contacted a lender, debt counseling agency, or debt consolidation service, by residential area, November/December 2009
                                                                                                                                  • Success with debt reduction
                                                                                                                                      • Figure 36: Amount of debt reduction if successful, by gender, November/December 2009
                                                                                                                                      • Figure 37: Amount of debt reduction if successful, by age, November/December 2009
                                                                                                                                      • Figure 38: Amount of debt reduction if successful, by race/ethnicity, November/December 2009
                                                                                                                                      • Figure 39: Amount of debt reduction if successful, by household income, November/December 2009
                                                                                                                                      • Figure 40: Amount of debt reduction if successful, by region, November/December 2009
                                                                                                                                      • Figure 41: Amount of debt reduction if successful, by residential area, November/December 2009
                                                                                                                                    • Types of debt that were renegotiated
                                                                                                                                        • Figure 42: Type of debt renegotiated, by gender, November/December 2009
                                                                                                                                        • Figure 43: Type of debt renegotiated, by age, November/December 2009
                                                                                                                                        • Figure 44: Type of debt renegotiated, by race/Hispanic origin, November/December 2009
                                                                                                                                        • Figure 45: Type of debt renegotiated, by household income, November/December 2009
                                                                                                                                        • Figure 46: Type of debt renegotiated, by region, November/December 2009
                                                                                                                                      • Where consumers go for debt relief
                                                                                                                                          • Figure 47: Type of institution contacted to reduce debt, by gender, November/December 2009
                                                                                                                                          • Figure 48: Type of institution contacted to reduce debt, by age, November/December 2009
                                                                                                                                          • Figure 49: Type of institution contacted to reduce debt, by household income, November/December 2009
                                                                                                                                          • Figure 50: Type of Institution contacted to reduce debt, by region, November/December 2009
                                                                                                                                        • Satisfaction with the debt relief process
                                                                                                                                            • Figure 51: Satisfaction with resolution of debt problem, by gender, November/December 2009
                                                                                                                                            • Figure 52: Satisfaction with resolution of debt problem, by age, November/December 2009
                                                                                                                                            • Figure 53: Satisfaction with resolution of debt problem, by household income, November/December 2009
                                                                                                                                          • Reasons for dissatisfaction with the debt relief process
                                                                                                                                              • Figure 54: Reason for dissatisfaction with debt modification, by gender, November/December 2009
                                                                                                                                            • Which loan is most important for consumers to pay?
                                                                                                                                                • Figure 55: Loan you would pay if you could only pay one, by gender, November/December 2009
                                                                                                                                                • Figure 56: Loan you would pay if you could only pay one, by age, November/December 2009
                                                                                                                                                • Figure 57: Loan you would pay if you could only pay one, by race/ethnicity, November/December 2009
                                                                                                                                                • Figure 58: Loan you would pay if you could only pay one, by household income, November/December 2009
                                                                                                                                              • Consumer confidence about their financial future
                                                                                                                                                  • Figure 59: Confidence about personal financial situation in next six months, by gender, November/December 2009
                                                                                                                                                  • Figure 60: Confidence about personal financial situation in next six months, by age, November/December 2009
                                                                                                                                                  • Figure 61: Confidence about personal financial situation in next six months, by race/ethnicity, November/December 2009
                                                                                                                                                  • Figure 62: Confidence about personal financial situation in next six months, by household income, November/December 2009
                                                                                                                                                  • Figure 63: Confidence about personal financial situation in next six months, by region, November/December 2009
                                                                                                                                                  • Figure 64: Confidence about personal financial situation in next six months, by residential area, November/December 2009
                                                                                                                                              • Cluster Analysis

                                                                                                                                                  • Cluster one—Mortgagers
                                                                                                                                                    • Cluster two—Chargers
                                                                                                                                                      • Cluster three—Counselees
                                                                                                                                                        • Cluster characteristics
                                                                                                                                                          • Figure 65: Personal finance clusters, November/December 2009
                                                                                                                                                          • Figure 66: Type of debt that was renegotiated, by personal finance clusters, November/December 2009
                                                                                                                                                          • Figure 67: Amount debt was reduced, by personal finance clusters, November/December 2009
                                                                                                                                                          • Figure 68: Type of institution contacted to renegotiate debt, by personal finance clusters, November/December 2009
                                                                                                                                                        • Cluster demographics
                                                                                                                                                          • Figure 69: Personal finance clusters, by gender, November/December 2009
                                                                                                                                                          • Figure 70: Personal finance clusters, by age, November/December 2009
                                                                                                                                                          • Figure 71: Personal finance clusters, by household income, November/December 2009
                                                                                                                                                        • Cluster methodology
                                                                                                                                                        • Appendix: Trade Associations

                                                                                                                                                          Companies Covered

                                                                                                                                                          • Ace Cash Express, Inc.
                                                                                                                                                          • Advance America, Cash Advance Centers, Inc.
                                                                                                                                                          • AIG American General
                                                                                                                                                          • Albemarle & Bond PLC
                                                                                                                                                          • Amgen Inc.
                                                                                                                                                          • Bank of America Corporation
                                                                                                                                                          • Bureau of Economic Analysis
                                                                                                                                                          • Capital One Financial Corporation
                                                                                                                                                          • Cash Converters Ltd
                                                                                                                                                          • CBS Corporation
                                                                                                                                                          • Citigroup Inc.
                                                                                                                                                          • Citizens Financial Group, Inc.
                                                                                                                                                          • Community Financial Services Association of America (CFSA)
                                                                                                                                                          • CompuCredit Corporation
                                                                                                                                                          • Consumer Bankers Association
                                                                                                                                                          • Countrywide Financial Corporation
                                                                                                                                                          • Credit Union National Association
                                                                                                                                                          • Discover Financial Services Inc.
                                                                                                                                                          • Federal Deposit Insurance Corporation
                                                                                                                                                          • Federal Reserve System
                                                                                                                                                          • General Motors Corporation
                                                                                                                                                          • Greenfield Online
                                                                                                                                                          • HFC Bank Ltd
                                                                                                                                                          • HSBC USA Inc.
                                                                                                                                                          • JPMorgan Chase & Co
                                                                                                                                                          • MasterCard Incorporated
                                                                                                                                                          • MBNA Corporation
                                                                                                                                                          • Merrill Lynch & Co. Inc
                                                                                                                                                          • Morgan Stanley
                                                                                                                                                          • Mortgage Bankers Association (MBA)
                                                                                                                                                          • Primerica Financial Services, Inc.
                                                                                                                                                          • Sears, Roebuck and Co.
                                                                                                                                                          • The American Bankers Association
                                                                                                                                                          • The American Financial Services Association
                                                                                                                                                          • The New York Times Company
                                                                                                                                                          • U.S. Bureau of Labor Statistics
                                                                                                                                                          • U.S. Bureau of the Census
                                                                                                                                                          • US Department of Commerce
                                                                                                                                                          • Visa International
                                                                                                                                                          • Wachovia Corporation
                                                                                                                                                          • Wells Fargo & Company
                                                                                                                                                          • Western Union Holdings, Inc

                                                                                                                                                          Consumer Finance and Credit Consolidation - US - February 2010

                                                                                                                                                          US $3,995.00 (Excl.Tax)