by Joseph Kenny | 09/30/09

According to Capital One Richard Fairbank, the outlook for the credit-card industry may be characterized by a lack of growth, even some periods of shrinkage due to the increase in consumer deleveraging.

Fairbank also cited signs that Capital One is beginning to stabilize in different sectors of its consumer business operations. Yet, he also expressed the need to be cautious.

During a presentation to analysts and investors in New York, Fairbank said that the present deleveraging of the consumer would become a dramatic force for change.

He also expressed his option that it would be great for consumers to reduce their debt since this may lead to reductions in missed payments and defaults in the future. "It's very healthy to have a de-leveraged consumer."

Fairbank added, "We as lenders will be paid through better credit performance."

The credit card losses are linked to escalating unemployment rates across the country are causing more Americans to struggle just to pay back the debt they amassed using the cards. Companies such as Capital One and American Express have been particularly hard hit by the trend.

For the near future, the company's expenses for adding loan loss provisions will remain high. In fact, for the next year or so, Capital One's consumer business will be downsized.

There have been comparisons drawn between the current condition of the credit card industry and the state that was prevalent back in the 1990s. During that time, there was a more equality among the competitors who made their mark through avenues such as underwriting skills rather than having no clear strategies to increase sales and provide quality products.

It is also true that presence of new regulations may help cut down total industry returns by a small margin; companies like Capital One are using a durable revenue model. In fact, the card company is likely to succeed if it focuses on strategies that utilize its competitive strengths.