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UK Cards Show Signs of Post-Christmas Debt Stress

A look at the UK Classic card trends based on data from December 2002 to December 2017 in the blog revealed the highest levels in that time period for spend and average lines. It also highlighted some potential signs of debt stress, most prominently among accounts 1-5 years on book.

We reviewed February’s data from the FICO Benchmarking Service to see the impact of the Christmas spend on this subpopulation. The normal seasonal trend of a sharp increase in delinquency in January with a drop in February was repeated this year.

Although results are still noticeably below those seen during the last economic downturn, more recent activity indicates possible areas of concern and debt stress:

  • The percentage of 2 cycle accounts was 26% higher than in February 2016, and was the highest for February since 2014.
  • The percentage of 2 cycle balances was also up by 24% and was the highest for February since 2013.
  • Average 2 cycle balances reached their highest since at least 2002 and are 15% higher than in February 2016.
  • Average card lines hit their highest point since at least 2002, growing 7% since February 2016. This means that average delinquent balances are growing at over double the rate of lines.
  • Despite this rise in lines, the percentage of overlimit accounts reached the highest level since January 2011. The average amount overlimit reached its highest February value since at least 2002, and was last at this level in March 2016 and higher in July 2012.
  • During the last 3 months average 1 to 3 cycle balances again reached over two-year highs for accounts <5 years on book.
Due to these continuing trends, we recommend that Issuers review their results to determine if they are seeing the same behaviour and to understand why this is happening, in case strategic changes are required in originations or account management. There is scope for issuers to review accounts earlier in the collections life cycle when they have not missed any payments but are spending above the agreed limit, and may be suffering from debt stress. A proportion of these will be higher risk than some accounts which have just made one payment late — so-called ‘lazy payers’.

This review could also be expanded to include other high-risk accounts that are still within their limit accounts. This type of early identification and intervention could also provide benefit in relation to IFRS 9 provisioning.  Issuers could establish whether a collections focus needs to be placed on the highest-risk, high-balance accounts in this particular segment as well as implementing or increasing the pre-delinquency actions.

I will be writing soon in more detail on the subject of pre-delinquency.

To learn more about our cards benchmarking service, or FICO’s new Risk Benchmarking Service which forms part of the Fair Isaac Advisors P&L Insight Suite, please contact me at

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