Richard D. Fairbank
Chairman and Chief Executive Officer at Capital One Financial
So, yeah. I really appreciate the question, Dominick, because I've often said, we're not in a position -- I wouldn't have any of you put any more stock or stake. I guess, you investors put stock in, but I wouldn't put any particular stake in our ability to predict the economy. But the credit cycle and the economy are not the same thing. They're correlated, but I think that the credit cycle is the thing that we really focus a lot on because I think a lot of elements of it are pretty predictable. Obviously, it is influenced by, and influences the economy.
So let's sort of pull way up. We were in this extraordinary period no one has ever seen before in terms of the credit quality during the pandemic. And we enjoyed and our investors enjoyed the high returns that we made in that time. But some of you may remember my saying, "Be careful what you wish for", because with every passing month that this cycle is abnormally good, we will pay the price later on the other side of that causally, because what -- and so, if you get into the behavior, and it really links not so much at all to the behavior of consumers, it's really about kind of to your question, what happens to lenders, providers of credit in -- at this part of the cycle, especially in an extreme thing? And we saw alarming things happening during the most extremely -- extreme periods during the pandemic. The most striking one to me was the absolute surge in FinTech lending.
How much of it there was? Who knows, because most of them are reporting to the credit bureaus. So it's just a matter of trying to infer what's going on. But -- so there was a big surge in supply, particularly to subprime, which is where almost all FinTechs go after. And that was alarming to us, and we felt with every month that supply keeps coming, as I said earlier, there's a price to be paid. Then we look at the context of overlay on top of that, the -- to your question about the common mistakes. What the FinTechs almost by definition were doing, because I'm not sure what else they would do, is they were leveraging technology building models in a lot of cases, but the rearview mirror that they were looking into the data set their models had were the greatest credit economy in the history of lending. So, that's a dangerous kind of data set for the models.
It was exacerbated by credit scores that had drifted dramatically more. And a lot of subprime customers moving into prime just by sort of the way scoring works and what was happening as a result of the savings rates going up for consumers. So with FinTechs, particularly, but for all the players in the business, the danger of the rearview mirror, the danger of the misreading the credit risk of customers because they were artificially, their scores would be artificially good. By the way, in our case, we pretty much just intervened in our own modeling and created a way to assume worse than the data says. We also, in our case, put heavy reliance on data and modeling from way back in the last few decades that allows us to sort of get past that. So that -- it's primarily the overexuberance of lenders in the environment of a combination of a great rearview mirror; and frankly, a lot of extra earnings, and feeling the ability to deploy a bunch of that into marketing.
Now what's happened since then? I think, this sort of great normalization has been a very healthy thing. It would be shocking if it didn't happen. But from a health of the industry point of view, I think it's a very good thing. Obviously, the FinTechs -- FinTech lending has gone way. Most of it has retreated significantly, I am struck -- my earlier comment is we watch very carefully the credit card industry, I think the major players seem to be pretty rational about the credit choices they make. And now, for everybody with charge-offs rising and without leveling necessarily manifesting itself, I think, it's bringing back the appropriate cautions in time for a softer landing here than might otherwise have been there. So, those are some of the thoughts that we have, and those are things to keep an eye on.
One other thing that I just sort of sieze a moment here on things that are on our mind, because I always try to -- my goal here is to always give you a window into how we're thinking and what net impression do I want folks there to come away with. As we look at opportunities and a thing that's very much on our mind is the CFPB efforts on late fees. And I just want to just comment on that because that it's a very important thing that's going on. The CFPB late fee proposal effectively reduces late fees by approximately 75%. And the CFPB is going after the fee that we believe is the most important fee in consumer credit business.
Late fees provide a direct and clear incentive for customers to pay on time and avoid becoming delinquent and damaging their credit records. And a small late fee may not have that deterrent effect. Late fees are also a way that issuers can partially price for risk, and this enables greater access for consumers, greater access to credit, and a lower cost of credit on average. A reduction in late fees is almost certain to reduce credit access to certain parts of the population. And the CFPB proposal is, of course, not yet finalized, and it could be subject to delays or changes due to litigation. But we have to plan for the potential of this becoming law early next year. And Capital One has pursued a strategy of offering very simple credit card products with limited fees and complexity. And ironically, the late fee has been an important part of our product structure because of the reasons that I cited earlier.
If the proposed rule is implemented, there will be a significant impact to our revenue, gradually resolving over time. And there are ways to mitigate the impact, but as a practical matter, those solutions will take several years to work their way through the portfolio. So as we pull up and I share with you how we're thinking of the business, we really like the opportunities in the card marketplace. We, for all the reasons that I've talked about -- but we also need to really stare at this proposal that may become the rule of the land, and I just wanted to share with you, how we're thinking about that. And that's an important focus of Capital One, and our solutions to that will be very focused on finding solutions that are consistent with maintaining a winning customer franchise, and that's a thing that takes time to work its way in.
Do you have another question, Dominick, you wanted to ask?
