The Credit Profile of The Credit Profile of Texas ConsumersTexas Consumers

A study proposed byA study proposed by

The Study Committee of The Study Committee of

The Texas Finance The Texas Finance CommissionCommission

The State of the StateThe State of the State

Texas was one of five states to get an F in a Texas was one of five states to get an F in a new report ranking the assets and new report ranking the assets and opportunities for families by CFED, a opportunities for families by CFED, a Washington, D.C., nonprofit that conducts Washington, D.C., nonprofit that conducts economic research.economic research.

Financial security: D.Financial security: D. Texas was 48th among states for average Texas was 48th among states for average

household net worth. Nearly one in five household net worth. Nearly one in five Texans has zero net worth. Only nine states Texans has zero net worth. Only nine states reported lower ratios of people per savings reported lower ratios of people per savings accounts. accounts. Ft. Worth Star-Telegram 7/8/05Ft. Worth Star-Telegram 7/8/05

The State of the StateThe State of the State

Texans have the worst credit score in Texans have the worst credit score in the nation. the nation. Study by Experian reported by the DMN Study by Experian reported by the DMN in Oct 03in Oct 03

In April Texas had the highest In April Texas had the highest foreclosure rate in the nation. foreclosure rate in the nation. April 2005 April 2005 Monthly U.S. Foreclosure Market Report, RealtyTracMonthly U.S. Foreclosure Market Report, RealtyTrac

Texas has high rates of delinquency.Texas has high rates of delinquency. Texas has a high incidence of Texas has a high incidence of

subprime lending.subprime lending.

The State of the StateThe State of the State

Collin County

Dallas Morning News 8/14/05

The State of the NationThe State of the Nation

Household debt is at an all-time high at Household debt is at an all-time high at $10.7 trillion$10.7 trillion[1][1], ,

personal savings are at zeropersonal savings are at zero[2][2], and, and foreclosures and delinquencies are rising.foreclosures and delinquencies are rising. Credit card debt is high at $768 billionCredit card debt is high at $768 billion[3][3]

. .

[1][1] Federal Reserve, Flow of Funds Accounts of the United States, Q4, 2004 Federal Reserve, Flow of Funds Accounts of the United States, Q4, 2004[2] Department of Commerce Bureau of Economic Analysis, personal saving [2] Department of Commerce Bureau of Economic Analysis, personal saving

rate was 0.0% of disposable income for June 2005rate was 0.0% of disposable income for June 2005[3] Federal Reserve Statistical Release: Amount of Revolving Consumer [3] Federal Reserve Statistical Release: Amount of Revolving Consumer

Credit Outstanding 2005, Q2Credit Outstanding 2005, Q2

The State of the NationThe State of the Nation Consumer debt is now equal to 110% of disposable income. Ten Consumer debt is now equal to 110% of disposable income. Ten

years ago it was 85%; just twenty years ago it was 65%years ago it was 85%; just twenty years ago it was 65%[1][1]..

The average American family spends $1.22 for every dollar it The average American family spends $1.22 for every dollar it earnsearns[2][2]. .

The average family saw its credit card debt grow by 53% in the The average family saw its credit card debt grow by 53% in the 1990s1990s[3][3]

As many as 25% of Hispanic households in the U.S. don't have 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 bank accounts and neither do a quarter of all families with incomes under $20,000. Nearly half of the families moving from incomes under $20,000. Nearly half of the families moving from welfare to work don’t have bank accounts eitherwelfare to work don’t have bank accounts either[4][4]..

[1][1] Daily Bankruptcy News Daily Bankruptcy News [2][2] From www.oscpa.com/?728 From www.oscpa.com/?728[3][3] Demos, “Borrowing to Make Ends Meet: The Growth of Credit Card Debt in the 90s”; www.demos- Demos, “Borrowing to Make Ends Meet: The Growth of Credit Card Debt in the 90s”; www.demos-

usa.org/demos/debt_assetsusa.org/demos/debt_assets[4][4] Federal Reserve Board, Survey of Consumer Finances (1998), Federal Reserve Board, Survey of Consumer Finances (1998),

www.federalreserve.gov/pubs/oss2/98/scf98home.htmlwww.federalreserve.gov/pubs/oss2/98/scf98home.html

Proposed Study ScopeProposed Study Scope

Draft a narrative report that discusses the Draft a narrative report that discusses the consumer demographics and economic consumer demographics and economic indicators that affect the wealth and credit indicators that affect the wealth and credit capacity of Texas consumers.capacity of Texas consumers.

Collect statistical data about the use of Collect statistical data about the use of consumer credit and consumer consumer credit and consumer demographics in Texas over the last 30 demographics in Texas over the last 30 years.years.

Determine if significant variations exist by Determine if significant variations exist by geographic area in the credit-worthiness of geographic area in the credit-worthiness of consumers.consumers.

Proposed Study ScopeProposed Study Scope

Elements that the report should discuss:Elements that the report should discuss: Credit scoresCredit scores Classification of types of lendingClassification of types of lending Incidence rates of types of lendingIncidence rates of types of lending Delinquency ratesDelinquency rates Foreclosure ratesForeclosure rates Savings ratesSavings rates Net worth of consumersNet worth of consumers Household income levelsHousehold income levels Homeownership rates of consumersHomeownership rates of consumers

Proposed Study ScopeProposed Study Scope What factors show the greatest What factors show the greatest

significance in predicting a consumer’s significance in predicting a consumer’s credit score?credit score?

To what extent are Texas consumers To what extent are Texas consumers underrepresented in the traditional credit underrepresented in the traditional credit reporting database systems due to “thin” reporting database systems due to “thin” or no credit files?or no credit files?

To what extent does lack of financial skills To what extent does lack of financial skills impact a consumer’s credit score?impact a consumer’s credit score?

What area of financial education could What area of financial education could have the greatest impact on improving have the greatest impact on improving consumer’s credit scores?consumer’s credit scores?

FundingFunding

An amount is included in the baseline of An amount is included in the baseline of OCCC’s appropriation that could be used OCCC’s appropriation that could be used for conducting studies, credit education for conducting studies, credit education opportunities, or regulatory activities. The opportunities, or regulatory activities. The maximum amount is $100,000.maximum amount is $100,000.

No additional revenue is dedicated for the No additional revenue is dedicated for the purpose of conducting studies. Any purpose of conducting studies. Any revenue would come from the fees paid by revenue would come from the fees paid by the regulated industries to the OCCC.the regulated industries to the OCCC.

Research RestrictionsResearch Restrictions An agency may not expend any funds … for research An agency may not expend any funds … for research

projects of any type until the agency has adopted and filed projects of any type until the agency has adopted and filed with the Legislative Budget Board a policy that clearly with the Legislative Budget Board a policy that clearly establishes and protects the property rights of the state establishes and protects the property rights of the state with regard to any patentable product, process, or idea that with regard to any patentable product, process, or idea that might result from such research. might result from such research. General Appropriations Act, FY06-07, IX-37, General Appropriations Act, FY06-07, IX-37, Sec. 6.20.Sec. 6.20.

Before expending funds that are appropriated by the Act for Before expending funds that are appropriated by the Act for the purpose of contracting for a consultant or other private the purpose of contracting for a consultant or other private assistance in performing a study required by the assistance in performing a study required by the Legislature that includes statistical or demographic analysis Legislature that includes statistical or demographic analysis of data, the agency conducting the study shall determine if of data, the agency conducting the study shall determine if the resources of the Texas Legislative Council or the the resources of the Texas Legislative Council or the University of Texas at San Antonio are available to assist University of Texas at San Antonio are available to assist the agency in designing or conducting that component of the agency in designing or conducting that component of the study. the study. General Appropriations Act, FY 06-07, IX-44, Sec. 6.32General Appropriations Act, FY 06-07, IX-44, Sec. 6.32..