The Credit Profile of Texas Consumers

1
The Credit Profile of Texas Consumers

• A study proposed by
• The Study Committee of
• The Texas Finance Commission

2
The State of the State

• Texas was one of five states to get an F in a new
  report ranking the assets and opportunities for
  families by CFED, a Washington, D.C., nonprofit
  that conducts economic research.
• Financial security D.
• Texas was 48th among states for average household
  net worth. Nearly one in five Texans has zero net
  worth. Only nine states reported lower ratios of
  people per savings accounts. Ft. Worth
  Star-Telegram 7/8/05

3
The State of the State

• Texans have the worst credit score in the nation.
  Study by Experian reported by the DMN in Oct 03
• In April Texas had the highest foreclosure rate
  in the nation. April 2005 Monthly U.S.
  Foreclosure Market Report, RealtyTrac
• Texas has high rates of delinquency.
• Texas has a high incidence of subprime lending.

4
The State of the State
Collin County
Dallas Morning News 8/14/05
5
The State of the Nation

• Household debt is at an all-time high at 10.7
  trillion1,
• personal savings are at zero2, and
• foreclosures and delinquencies are rising.
• Credit card debt is high at 768 billion3.
• 1 Federal Reserve, Flow of Funds Accounts of
  the United States, Q4, 2004
• 2 Department of Commerce Bureau of Economic
  Analysis, personal saving rate was 0.0 of
  disposable income for June 2005
• 3 Federal Reserve Statistical Release Amount
  of Revolving Consumer Credit Outstanding 2005, Q2

6
The State of the Nation

• Consumer debt is now equal to 110 of disposable
  income. Ten years ago it was 85 just twenty
  years ago it was 651.
• The average American family spends 1.22 for
  every dollar it earns2.
• The average family saw its credit card debt grow
  by 53 in the 1990s3
• As many as 25 of Hispanic households in the U.S.
  don't have bank accounts and neither do a quarter
  of all families with incomes under 20,000.
  Nearly half of the families moving from welfare
  to work dont have bank accounts either4.
• 1 Daily Bankruptcy News
• 2 From www.oscpa.com/?728
• 3 Demos, Borrowing to Make Ends Meet The
  Growth of Credit Card Debt in the 90s
  www.demos-usa.org/demos/debt_assets
• 4 Federal Reserve Board, Survey of Consumer
  Finances (1998), www.federalreserve.gov/pubs/oss2/
  98/scf98home.html

7
Proposed Study Scope

• Draft a narrative report that discusses the
  consumer demographics and economic indicators
  that affect the wealth and credit capacity of
  Texas consumers.
• Collect statistical data about the use of
  consumer credit and consumer demographics in
  Texas over the last 30 years.
• Determine if significant variations exist by
  geographic area in the credit-worthiness of
  consumers.

8
Proposed Study Scope

• Elements that the report should discuss
• Credit scores
• Classification of types of lending
• Incidence rates of types of lending
• Delinquency rates
• Foreclosure rates
• Savings rates
• Net worth of consumers
• Household income levels
• Homeownership rates of consumers

9
Proposed Study Scope

• What factors show the greatest significance in
  predicting a consumers credit score?
• To what extent are Texas consumers
  underrepresented in the traditional credit
  reporting database systems due to thin or no
  credit files?
• To what extent does lack of financial skills
  impact a consumers credit score?
• What area of financial education could have the
  greatest impact on improving consumers credit
  scores?

10
Funding

• An amount is included in the baseline of OCCCs
  appropriation that could be used for conducting
  studies, credit education opportunities, or
  regulatory activities. The maximum amount is
  100,000.
• No additional revenue is dedicated for the
  purpose of conducting studies. Any revenue would
  come from the fees paid by the regulated
  industries to the OCCC.

11
Research Restrictions

• An agency may not expend any funds for research
  projects of any type until the agency has adopted
  and filed with the Legislative Budget Board a
  policy that clearly establishes and protects the
  property rights of the state with regard to any
  patentable product, process, or idea that might
  result from such research. General
  Appropriations Act, FY06-07, IX-37, Sec. 6.20.
• Before expending funds that are appropriated by
  the Act for the purpose of contracting for a
  consultant or other private assistance in
  performing a study required by the Legislature
  that includes statistical or demographic analysis
  of data, the agency conducting the study shall
  determine if the resources of the Texas
  Legislative Council or the University of Texas at
  San Antonio are available to assist the agency in
  designing or conducting that component of the
  study. General Appropriations Act, FY 06-07,
  IX-44, Sec. 6.32.