Financially underserved consumers now spend more than $100 billion a year on financial fee and interest charges, according to a report released Thursday (Dec. 11) by the Center for Financial Service Innovation.
The CFSI estimated that underbanked U.S. consumers used $1.3 trillion in financial products and services in 2013 and spent $103 billion on the nonbank charges, up 7.1 percent from 2012’s $96 billion in charges. In 2014, that spending is projected to grow 4.6 percent to $107 billion, Credit Union Times reported.
Much of the growth came from expansion in subprime auto lending and auto leasing, which has been crowding out more expensive “buy here, pay here” auto-sales outlets.
Another growing niche: credit cards. “The increasing availability of subprime credit through credit cards has brought renewed strength to consumer solicitations and approvals in the Subprime Credit Card segment, a trend projected to continue in 2014,” the CFSI wrote. Secured credit cards also saw a sharp jump in revenue, driven by a 30 percent jump in average fees from 2012 to 2013. But those fees are expected to plateau in 2014.
And just as with more mainstream financial services, products aimed at lower-income and financially underserved consumers are shifting online, the CFSI said.