Bread Financial (BFH) TD Financial Services & Fintech Summit summary

Regulatory environment and late fee rule

• Ongoing litigation over the CFPB's late fee rule is creating uncertainty, with a stay in place at least through June 18 as courts decide jurisdiction, and October 1 remains a possible implementation date.

• Preparation includes partner agreements on higher APRs, new fees like a $2.99 paper statement fee, and product changes to offset potential revenue loss from lower late fees.

• Partners generally prefer consumers bear the cost of regulatory changes, with APRs adjusted to remain competitive.

• Portfolio may shift away from higher-risk customers, with more focus on co-brand and buy now, pay later products to diversify and maintain profitability.

Consumer trends and credit performance

• High-end consumers remain resilient, while middle and lower-income consumers are pulling back on big-ticket purchases and shifting to non-discretionary spending.

• Consumers are making more frequent, smaller purchases and living more paycheck to paycheck, reflecting a soft environment.

• Losses are expected to peak in May, with a decline anticipated in the second half of the year, setting up a better run rate for 2025.

• Credit tightening measures include lower approval rates, reduced line assignments, and paused line increase programs, with the most impactful actions already implemented.

Growth, competition, and product strategy

• New and existing program economics are being evaluated with lower late fees in mind, with rational competition prevailing in the market.

• Product diversification continues, with increased emphasis on co-brand and buy now, pay later offerings as private label demand shifts.

• Growth moderation is driven by both company actions and consumer self-regulation, with the largest impact from credit tightening now behind.