TowerGroup: Subprime Lending Meltdown Fuels Risk and Opportunity for Creditors

    NEEDHAM, Mass., Sept. 24 /PRNewswire/ -- The effect of the subprime
 mortgage meltdown continues to radiate out across the credit markets. Alan
 Greenspan, the former Federal Reserve Chairman, stated in recent interviews
 there is a one in three chance of a US recession. New research from
 TowerGroup explores the impact on consumer debt and credit cards.
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     In analyzing four key economic factors that influence both the US
 economy and consumers' spending behaviors -- unemployment, consumer debt,
 consumer confidence, and consumer savings -- TowerGroup forecasts that even
 as consumers moderate their spending in the coming months, the number of
 consumer loan delinquencies will continue to rise. Rate relief from federal
 regulators is only the beginning of the story. Mortgage lenders are likely
 to bend to public and government pressure to be more flexible when making
 repayment arrangements with mortgage customers to prevent foreclosure.
     While the subprime mortgage credit collapse has tightened credit
 availability in both consumer and commercial markets, banks appear to be
 anticipating the need to slacken credit standards for specific products
 like credit cards in an effort to accommodate credit needs and increase
 balances. TowerGroup believes this lowering of approval standards signals
 that credit card lenders are preparing to attract and grow balances
 previously lost to home equity lines of credit (HELOCs), which now
 unavailable to many consumers.
     The loosening of standards for certain products represents an
 opportunity for businesses that support credit card lenders with products
 aimed at new customer acquisition. Marketing companies, software providers,
 and credit/risk scoring companies will benefit from this shift. But while
 credit card issuers have the opportunity to attract new customers, not
 everyone will be looking for additional credit. TowerGroup expects
 continued growth in the prepaid and debit card segments as well as a
 continuing shift in dollar volume to transactors for households unwilling
 or unable to take on additional debt.
     The new TowerGroup research report titled "Subprime Mortgage Meltdown:
 Upside for the Credit Card Business?" by Dennis Moroney, senior analyst in
 TowerGroup's Bank Cards practice, offers insights on the market risks and
 opportunities for credit card issuers and their vendors and partners. The
 report also examines economic factors and consumer purchase behavior as
 well as trends in the credit card industry.
     The report is available to qualified members of the press for review.
 To request a copy or to arrange an interview with Moroney, please contact
 Jorge Lavina at +1.212.455.8041 or jlavina@cooperkatz.com. Those interested
 in subscribing to a TowerGroup research service may call +1.781.292.5200 or
 email service-info@towergroup.com.
     Sign up for the bi-weekly newsletter, TowerGroup News, to stay informed
 on the latest research and events. To learn more, visit:
 http://ui.constantcontact.com/d.jsp?m=1101074606706&p=oi.   About TowerGroup: TowerGroup is the leading research and advisory
 services firm focused exclusively on the financial services industry. A
 respected source for trusted information and advice, TowerGroup brings many
 of the world's leading financial institutions, technology companies, and
 professional services firms a deeper understanding of the business and
 technology issues impacting their organizations. Headquartered near Boston
 in Needham, Massachusetts, and with offices in North America and Europe,
 TowerGroup serves a global client base. Visit http://www.towergroup.com for
 more information.
     Contact:
     Jorge Lavina
     jlavina@cooperkatz.com
     +1-212-455-8041
 
 

SOURCE TowerGroup