Good morning. Thanks everyone for joining. Welcome. My name is Terry Ma. I'm the new consumer finance analyst at Barclays. I'm very pleased to have Brian Wenzel, the CFO of Synchrony, with us. Welcome, Brian.
Great, great, Terry. Thanks for the invitation. It's, I think, for this city, for our nation and probably the world, right? When you think back 22 years. And, you know, my thoughts and prayers go out to those that lost their lives in that terrible, horrific day. And the families whose lives were devastated and tremendous appreciation, really, for the first responders, the military in the days and years to come, for our values and supported this nation. So, tough day. Glad to be here.
Okay, great. So let's start. So Synchrony exited the first half of 2023 with pretty good momentum. Second quarter account growth was up 7% year-over-year, and purchase volume was the highest ever for that quarter. Let's just get a mark-to-market in the third quarter. Can you maybe just talk about how volume trends are shaping up and also maybe talk a little bit about the sales across each of the platforms?
Yeah, you know, the consumer continues to be incredibly resilient. I think when I look at the highest level, when I think about purchase volume, it's going to be down sequentially on a per account basis, but that just follows normal seasonality that we see. So they're hanging in there from the sales trajectory standpoint. I think if you look at the credit, you know, receivable growth in the 14%+ range, you know, down a little bit from the second quarter, but really kind of hanging in there. So the consumer is strong. The, you know, payment rate is declining a little bit. When I look underneath at the data, we look at the trends, we do, you know, still continue to see some transaction value decline, but frequency up a little bit.
Not in troubling areas, I get grocery get consistent. So I'd sit there and say it's remarkably consistent quarter-on-quarter. You know, again, as we move into the back half of the year, I think when people look at the these, they're going to get tougher because last year was such a strong third and fourth quarter, so. But absent that, it's very consistent. When I look at the platforms, you know, we continue to see the leader being health and wellness, and, and the spend that's going on in that, that platform. Digital continues to be our, our second strongest platform and then followed, you know, then, then by diversified value, with strong partners, there at Sam's and TJX, I really call them also. Across the franchise, we continue to see strength, and the consumer continue to be very resilient, through what is challenging for some.
Got it. Got it. That's helpful. Let's turn to receivables growth. Thanks for the managed data this morning, by the way. You guys increased your 2023 growth outlook to 10%+, and that's up from 8%-10%. Again, you said managed data this morning for August, so it's about 14.5% growth. So how should we think about the growth for the second half of the year in receivables?
Yeah, we're going to maintain the same type of pace. Again, you have to go back and look at the third and fourth quarter growth, which was more outsized. One of the things that came out post-Omicron last year, as you saw, this incredible ramp up in the back half of the year. So we're really moving into that. I do think as that kind of comp comes down, the wild card will be payment rate, which continues to decline, but continues to decline at a slower rate. So I think when you thought about, you know, 8%-10% to 10%+, probably the bigger movement there in our expectations has been the payment rate.
We were probably a little bit more conservative with how we thought about it, but again, the consumer continues to be well above pre-pandemic levels when it comes to payments.
Got it. Got it. It's helpful. So I guess when you put these pieces together, the spend trends that you see, the revolve rates, payment rates, what, what's that kind of tell you about the health of the consumer?
You know, the consumer is managing their balance sheet pretty well. It is clear, and we'll talk about, I'm sure, when you're probably going to ask me a question on credit. There is a K-shaped recovery, right? So the bottom end is revolving at a pace similar to the pre-pandemic period. The upper end is not revolving as much and not, you know, payoffs, which are still incredibly high. So look at that and consider the economy that's happening inside the consumer. When I look at the balance growth between here and what was pre-pandemic, and you think about a CAGR rate, it's not an unusual, you know, high CAGR. So people look at the balance now versus 2019, but forget that it's three years ago, right?
So I look at that, consumers are, you know, able to manage on a very good basis their debt load. So while the credit cards are at an all-time high as an industry, they're doing fairly well in total.
Got it. On the last earnings call, you guys tightened on the edges. What did you see to actually push you to implement those changes?
Yeah, you know, first, let me just highlight the fact. Our changes generally are idiosyncratic, so we look at partners, channels, credit grades in order to make decisions. In certain instances, in June, we did this. We looked at the portfolio as a total and said, you know, are there risks in the portfolio that we want to just make sure we're taking care of? One of the things that we've seen is when we've seen significant score migration, right? Which happened really when, during the pandemic. If you see 50 points, so moving from 680 to 630, that was a telltale sign because they weren't going to perform well and probably were not a 680....
So what we did is we said, "Okay, see significant score migration in that level going into non-prime, we're going to take action on that consumer." So that's the case. As we move forward, right, into the back half, we're going to continue to watch performance of the consumer, right? The challenging thing is that we have a shared consumer, so to some degree, if people are making bad decisions, we just have to be careful about that and take actions so that we really, you know, can deliver upon our credit outlook.
Got it. Got it. So speaking credit, it seems you guys are outperforming your credit, your initial credit expectations, this year. You pushed out the timing of delinquency normalization. So can you just talk about what the credit outlook is for the second half of the year and into 2024?
You know, generally, we are pleased with credit. I don't think we get enough credit as a company with regards to how we're outperforming our peers. Because even if you look at today, you know, we're at the low 90s% of our delinquency relative to the pre-pandemic period. There's a lot of other people that are through their pre-pandemic delinquency, through their pre-pandemic mean loss rates, but we're not. And there's a couple factors that really go into that. One, you know, we talked about on our investor day, we continue to talk about, is our Prism Data. We're less reliant upon credit scores more than attributes we take in. At underwriting, we can have up to 7,000 attributes we're taking in to make an informed business decision about either origination or account management.
So we take a slightly different approach, mainly because we originate, and we don't have the ability to discern or pick out customers. So I think as you think about those tools being in place, the ability to surgically deal with problems, you know, we feel comfortable with the guidance range that we had of up to a rate of 4.85%. So again, probably 100 basis points below our kind of historic or mean targeted underwriting percentage, 5.5%-6%.
Got it. And then what about the RSA? How does it make you think about the RSA as we move into 2024?
You know, listen, the RSA is acting as designed. I know when it went above 6%, everyone's like: What's going on here? Because, you know, losses were half what they are today. And when you have that situation where the rate, you know, of charge-off declines so much that through the RSA, so the retailers really benefited from sharing in that mechanism. Now, as we migrate it back up, you know, the RSA is coming back in line, coming down. And when you look at it, you know, when we went public, we said the rate was going to be 4%-4.5%. I think we have a rate now that's, you know, around 4% for guidance for this year. So it's acting as designed.
So we expect it will continue to provide a cushion to the increase in charge-offs. It's going to be offset partially by margin and interest and fee income as that rises back up, as payment rate declines. So the RSA will work in both ways, but really provide more resilient results for us versus a lot of our peers.
Got it. Got it. So you talked about your target loss range of 5.5%-6% or maybe normalized. I guess, can you talk about what confidence you have that will actually stabilize around there? Because when I think about normalized losses, I tend to think about an average through the cycle.
So mathematically, you should spend a number of periods below and a number of periods above. You're saying it's kind of stabilized around there. So just, any color you can provide.
Yeah, you know, listen, we underwrite to that 5.5%-6%, right? That's really the goal of the organization. We do, and if we had a feeling that we go above the 6%, we will take informed credit decisions in order to try to manage it back into that five range. For us, that target charge-off rate is optimal for us when we think about a risk-adjusted margin. We really don't want to operate above 6%, and we, to be honest with you, really don't want to operate below the 5.5%. I think there's a sweet spot when it comes to the amount that we can charge and that charge-off rate.
So, you know, again, I think if we get a sense that that's going to happen, we'll take account management actions that we try to, to try to maintain that 5.5%-6%, if it's going to come outside our targeted underwriting framework.
Got it. And just to follow up on that, how quickly can you kind of react, and how soon will those account changes kind of flow through?
Yeah, you know, the account changes tend to take nine months. So you have to probably know 9-12 months in advance and say, "Hey, listen, I want to do it." When we decide to take action, right, the tools in which we can put in place, we can have things implemented within a, you know, call it a three-four week time frame where we can take based actions. Again, we're making refinements every day on a portfolio, so every day we're making small adjustments. But larger adjustments, if we felt that we needed to, you know, we would do in a course of a month and do that. The thing where we have to do, the reason why it takes a month, is we have partners on the other side.
We have to engage them to let them know, because they're going to feel the effect when it comes to sales and other things. So, we'll be very thoughtful if we have to do that, but that would be our intention.
Got it. Got it. Okay, so just to touch on the reserves, is it still your expectation it should drift back down towards CECL day one over time?
Yeah, over time, there's nothing in the portfolio today. We'll see a little bit of mix shift, but our intention is it should go back to, you know, yeah, that day one percent. Now, unfortunately, we weren't in normal CECL, right? We topped the CECL, the pandemic happened, and then all bets were off. But the portfolio, there's nothing in the loss content in the portfolio that would tell me, at the end of the day, I should have a different amount other than CECL, other than FX rate. When you get longer-term promotional financing, maybe some higher loss content was adjusted. Next, we should go back over time to that CECL day one rate. Again, the timing of that is going to be a little bit unclear, right?
Because I think we're in a period now where we're still trying to figure out what's happening with the economy. We're still trying to figure out what's happening with the consumer. There's a lot to go, you know, with interest rates and, and what that does. But, but again, at some point, we do believe back to that day one, around that day one rate.
Got it. Can you just remind everyone how much is embedded in the reserves for macro? I guess, what do you need to see to actually have those overlays removed?
Yeah, so let me just talk a little bit about the overlays. We have overlays on for inflation, macroeconomics, student loans. So when you think about the overlay, the question is, you know, has the overlay manifested itself in the data, or is the overlay not needed, right? So I think we would see potentially is that some of those overlays will begin to manifest themselves into the data, and then you can release them, or we'll just we'll release them. So they are really dependent upon how they were set. And when we have clarity, is really the majority of the overlays are going to go back to the macroeconomic background, get clarity on the macroeconomic background, and what we have.
So, it's going to happen over time, but we'll try to be thoughtful with regard to that, you know, to be protected so we won't have significant swings.
Got it. And then there is the topic of student loan forbearance ending. You know, any color you can give on any potential impacts to your portfolio or even maybe any color you can give on what portion of your portfolio is exposed?
Yeah. So I'd say this, we've done a lot of work around identifying the consumers that have student loans, have student loans in forbearance inside our portfolio. And let me just remind people about a little bit of the statistics around it. 46% of that population was underwritten when they were actually making payments. You know, call the remaining, when they were in forbearance, you know, probably another 30% or so were underwritten in the early part of the pandemic, you know, the remainder of the pandemic and post-pandemic period. Regardless of whether pandemic or post-pandemic, we believe we try to take into account that forbearance relative to how they performed.
So when I look at the spike or the delinquency metric, it's remarkably consistent, a little bit worse, but remarkably consistent with the overall book. That said, you know, payments are turning back on. A fair number of folks have changed servicers, had servicing changes, so we expect there's going to be a little bit of noise. I think through the fourth, kind of get settled, then we'll see what happens. So we feel good about the population because of the way in which we underwrite them. When we underwrote them, we will continue monitoring.
Obviously, not reporting them to the bureaus if they go delinquent, a little bit problematic, but we're working with the, with the credit bureaus with regard to getting other data points on these types of accounts that we will hopefully will be able to understand if they are feeling pressure or if their hierarchy of payments are changing, so we would take appropriate action. But again, I, I think we provide a little, you know, incremental reserve on top to do it.
Would you, I guess, quantify how much you've reserved for this?
No.
Fair enough.
Good try, though.
Do you have a view, I guess, on the potential benefit or impact of the 12-month new IDR plans?
The is...
The new IDR plans for federal student loans.
Yeah, you know, listen, we're going to evaluate those. It's going to be interesting. It's not a large population of accounts that would impact for us. So again, we continue to monitor those developments, but it's not really going to be meaningful for us.
Okay, fair enough. So I'm going to switch gears and probably talk about our topic, regulatory action and competitive licenses. Will you just maybe, give us your updated thoughts on timing and just the proposed change?
Yeah, you know, I will say, I'll say it again and continue to say it. Unfortunately, we think this is a the proposal that was out there was just incredibly deficient. It is going to contract credit for people. It's going to drive costs up of credit for people. And it really doesn't, it doesn't really provide significant value, I think, to the consumers as a whole. So unfortunately, we're disappointed with the proposed rule. Everything leads me to believe that the proposed rule will not change significantly. And I think the intention that the CFPB has indicated that it will be sometime, you know, October or before the end of the year. So we're on that kind of timeline, timeframe, excuse me, for having them initiate the proposed rules.
Our team, you know, we have a large number of people that are exclusively on this for us, you know, to understand the mitigants and the strategies and how we would actually do that. We'll be prepared to the extent that the rule gets issued, it's like the proposed rule.
Got it. So, it's a pretty large piece of revenue offset. Can you maybe just talk about the levers that you have to potentially offset them?
Yeah, you know, first of all, you know, for investor stakeholders, you know, we've dealt with something very similar with the Card Act, right? And you know, we made a series of changes, and I think we put out charts that kind of showed that we're able to manage through the Card Act changes, which, again, were a little bit longer as far as implementation. But go through that. So our intention is to mitigate this to get back to the same type of return threshold. I think some of the things that you're going to see in the industry, you'll see a higher APR structure for people. I think you'll see more penalty, risk-based pricing enter into the equation as well.
I think you're going to see different types of fees that get assessed to the consumer, some of which will be designed to provide a deterrent. Because the rule on itself, when it's eight dollars, if I look down this room, I see a lot of eight-dollar lattes in here. You're not going to have as much deterrence. So how do you create fees that create deterrence? So you'll see that. I think you'll see, you know, some practices change with regard to how, you know, leniency with regards to consumer on certain things, waivers, et cetera. So I think things will tighten, but I think the overall fee and account structure, you know, will generate higher.
I most certainly think you're going to see a contraction of credit to low credit rates. And high-end, you know, higher-end credit rates. So think about super prime and prime, who do revolve, they're going to pay a higher cost. The people at the bottom end, access to credit, or have to pay significantly for access to credit, which I think is an unfortunate outcome. I also think that there will be a movement to accelerate reporting to the credit bureaus, if you are delinquent. Now, what that will all do, and the product here is if you do see a bunch of delinquency that just comes into the cycle, it doesn't generate loss, it comes into the cycle, everyone's models are going to get upside down. So mortgage, personal loan, auto, et cetera, how you deal with it.
So it just unfortunately has a lot of unintended consequences. But again, we want to do things that first provide the deterrence, that are late fee, if that's the number that you choose, it's a safe harbor. If that gets out, that you're going to use pricing actions to create deterrence.
Got it. Well, maybe just dig a little deeper into the offsets. You talked about APR, penalty pricing, additional fees. Is there a way to help us think about just the magnitude and timing of each one of these to offset the revenue?
Yeah, listen, it's going to be a combination. Obviously, if the late fee, you know, rule goes into effect, the way it was proposed, well, there's an immediate effect when it comes to the reduction in late fees. We are using a combination. We're using a combination in order to try to mitigate both the timing and the overall effect. I think if the rule gets implemented, then I think we'll be back with the exact, you know, view of how the timing, the magnitude will show up in our financials. But we're going to save that to see what the Fed actually, or I'm sorry, CFPB actually does.
Got it. Okay. Onto other regulatory issues. Can you maybe just talk about Basel I and II, CCULAC, and OTD, and kind of what are the potential impacts?
Yeah, yeah. This is another, you know, frustrating piece for a lot of banks. I think the folks, you know, talk to banks. You know, unfortunately, as the Vice Chair said, he wanted a holistic review of the capital regime. Unfortunately, we view this rule, and I speak for myself, but probably for others, it doesn't feel very holistic. There are inherent double count when you think about rules around operational risk and how that interacts with your stress capital buffers, et cetera. So, it was a bit reactionary. I think there was a lot of gold standards that were put out there, some of which are much harsher than what you see in Europe, so it puts the banks here at a competitive disadvantage.
So all in all, we think the rule has a lot of flaws. Extremely, I think there's going to be pushback to the proposed capitals. When you think about the specifics of this, I mean, you know, if I don't try to mitigate any of it, it will win as a place. It has a modest impact on our capital stack, but I think when we think about the mitigation of things that we can do, it's very manageable, I think, from a capital, capitalist perspective for us. You know, there are positives and negatives, right? So we benefit out of the credit cards getting a slightly lower RWA rating. Our open-to-buy structure creates a little bit of, you know, offsets that. So we'll have to look at the buy structure.
Most certainly, when you think about the deductions directly to the capital stack, it's not an issue for us. The rules that they changed around DTA, it's just probably a little bit more significant. And again, that's something that, you know, devalues how you think about the intrinsic value of DTA. So, you know, we'll most certainly comment on that. And then when you think about the operating risk, again, you know, we have an RSA buffer that takes, you know, a lot of the operating risk with the partners. So I think, again, absent the double count between there and the stress capital buffer, it will be manageable.
I think when you go to the long-term debt piece of the equation, long-term debt is not an issue based on how we've done it, how we've issued debt in the past. But today, we have a surplus under the calculation if it went in as is, and most certainly we can manage it without any increased cost. The other items, the SLR, again, shouldn't be an issue for us. So, again, you know, it's unfortunate. We, you know, we will provide comments back to the trade associations, maybe directly. You know, as an institution, that's how we feel, we feel that the tailoring rules have essentially been taken away. So there's a little bit of probably cost for us to comply. But again, the overall effect, and I apologize, I feel long with the answer, because it's the first time I'm speaking about it, is manageable for us.
Got it. Got it. I want to go back to credit, for a second. I mean, the managed data shows it's, it's been pretty steady, and you talked about the K-shaped recovery. Can you maybe just give additional color on just how prime and non-prime segments are performing in terms of credit?
Sure. Let me first go for the folks in the room that haven't seen our credit data this morning. Our delinquencies are up just over two basis points sequentially. Year-over-year fees declined, and the charge-offs were essentially flat month-on-month. So think about the non-prime segments for a second. When I talk about a K-shaped recovery, what we are seeing there is that those accounts are performing at or maybe slightly worse than the period, depending upon the credit grade. But that's what we expect normal. Those are the people that are feeling inflation. While they may have gotten wage growth, under pressure. I think moving up the credit grades, and you get into the prime customer and the super prime customers, those are the folks that have benefited during the pandemic.
They still were not impacted as much with regard to the inflation. So they were actually performing better than the pre-pandemic period. I think when you look at the last couple of years, and I want to stop the point for a second. If you go to TransUnion data, part of Bureau data, so not our data, the vintages over the last couple of years from an industry standpoint, are performing worse. And these, unfortunately, are some of the biggest vintages that have ever been issued by the, you know, the credit card industry as a whole. So, you know, during the pandemic, lots of issuers went ahead and either opened their credit standard, didn't account for storm migration, but they are performing worse.
If you looked at our data against that, we're performing better than those vintages, partially because we didn't change our credit criteria. We're probably as tight, or if not tighter than the, you know, the pandemic period. So, you know, we try to protect ourselves. Now, we got criticized a little bit for not having that downsized growth during that pandemic window, but we said we didn't want to make it up. And so now the effects of that, we have to watch that because we do have a shared consumer, and will that leak over? And we're trying to be very thoughtful with regard to that. But what you really do see at the top end, you know, we have more super prime accounts than we had in the pandemic period. So, you know, super prime's up.
That prime, you know, customer is performing better than, you know, better than, you know, the pre-pandemic period. And then the bottom end is performing at or maybe slightly worse than the pre-pandemic period.
Got it. So that's, that's helpful color. What about, on spending? When you look at, spending behavior, anything, to point out across the segments?
Yeah, you know, it's what you would expect. The higher-end consumers are continuing to spend at a good pace. They were paying at a good pace, so that's good. I think you're seeing at the lower-end credit grades, they are moderating their spend. They've been very balanced with regard to how they allocate. So they're not pulling back, they're not facing it, they're just reallocating dollars. So you do see a little bit of shift in their spending, but we really don't see... You know, we're very broad-based. We don't see the consumer changing spending behavior patterns to date significantly. They've been remarkably consistent during this period.
Got it. Helpful. I have one audience response question. Operators, can you just queue that? We can go to Q&A afterwards. Over the next year, would you expect your position in Synchrony to, one, increase, two, decrease, or stay the same?
I didn't convince half the room to go into the one.
Okay, so we're going to open up the Q&A. Any questions? No questions at all. Okay, maybe I'll just ask another question.
Sure.
Can maybe just give a little more color on your growth by vertical. You touched on it a little bit, earlier, but maybe just talk about the home vertical. Any changes in growth or anything that you've seen?
Yeah. It will look remarkably like the... If you look back to the second quarter, you know, at 20%+ in health and wellness, that vertical continues to do well, led by dental and the two largest ones. You know, our acquisition, Allegro, which brought us a different product in audiology, a long-term installment product, has done incredibly well. So we see strength in that vertical, and that will be the sales platform that probably continues to lead us in the short term, you know, higher. I think the next one, obviously, is digital. You know, there we just have tremendous opportunities. You know, we have a relatively low penetration rate when you think about some of the big e-players into that platform.
We have, you know, a couple of the new startup programs that are in that. So that one, again, will continue to be, have outsized with above average, company average growth. And then you're down at diversified value, right? If you think about, you have two retailers in there that are doing very well, you know, TJX and Sam's. They're doing incredibly well as retailers. You know, they're great partners for us, so we continue to do well there. Then I think you get into the other two, which will be company average, to maybe slightly below, is home and auto, right? In home, you do have a rotation, right? So we see, you know, maybe some home furniture coming down, but you see some of the other things kind of coming up to offset.
So it will continue to have very, very good growth, albeit a little bit slower than some of the other sales platforms. Then you're down to lifestyle, right? And again, there, it'll probably see a little bit lower when you think about some of the luxury items. You know, outdoor power, outdoor segment has done incredibly well over the pandemic period. That will slow just because you probably pulled a lot forward. But again, you know, you'll see decent growth out of that sales platform, probably just below the company average.
Got it. You spoke a while ago, in your earnings call about monitoring call center trends, and you picking up any themes about inflation on the consumer. Can you maybe just update that? Is there anything noticeable you've kind of picked up?
Yeah, you know, it's really good for me to listen to calls and try to see what's happening with the consumer. When we were in the middle of the pandemic, we heard quite a bit around, or think about last year, maybe it's regular pandemic, around inflation, the pressure on inflation and things like that. I think when you think about the collection calls today, they probably reverted back to what I'd say is the pre-pandemic period. Hey, I lost my job. Hey, I had a health incident, so, you know, I can't make payments. I do think, you know, one of the signs you begin to see in a cycle like this, you do see more people reaching out and using debt settlement companies.
So we do have, you know, more of those kind of coming in, not alarming, but more coming in. That's a consumer who decided that's a better avenue versus bankruptcy or just letting every account write off and try to settle it. And most certainly, if we got into a typical backlog period, that's a lever, settlements are a lever in order to try to get as much money as from a consumer who's not going to be back. So just a little bit uptick in debt settlement, but nothing that's alarming coming out of those calls.
Got it. Okay, so last question for me. Maybe just update your thoughts on capital allocation and capital returns. I think that's been Synchrony has to issue additional preferred before you can get down to your target capital ratios. Maybe just update us on your thoughts on that.
Yeah, you know, the first thing for the folks in the room, you know, we are in a very good position. We have, you know, a lot of excess capital. We want to be smart about deploying that excess capital back into it. You know, we were on a very, I'd say, methodical journey. When we separated from our former parent, we came out with 18% CET1. That was by design in order to get the Fed to approve the separation. You know, from there, we've gone from 18, we're down into the 14s. People didn't think we'd go lower than 14. Now we're down into the 12s. So, we'll continue to do that. Our first priority is RWA growth.
We just have tremendous ability to grow at that, you know, high single-digit rate. You know, our long-term framework says 7-10. You know, this year we're above that framework. So the first thing we will always look to is there organic RWA growth that we can invest in that's at the right risk-adjusted return? So that's priority number one. Priority number two for us is a dividend. We increased the dividend just under 10% to $0.25 per share per quarter starting here in the third quarter. So that's really important for us to maintain cash back to our investors. Then the residual amount kind of goes into, you know, two buckets.
One, is there an inorganic opportunity that makes sense for us to invest at the right price and return on invested capital metric? If there is, we would deploy it there. If not, then our view is, you know, a consistent share repurchase program in order to return that capital back to shareholders. So that's really the priority. And the last two was, you know, inorganic or share repurchase. They're kind of one bucket, and you make that choice. So again, we come from a position of strength, even with the new rules, we're going to be in a position of strength, and our view is we get that. You are right, we cannot get to the 11% target unless we do additional preferred. That market has been a little bit choppy.
We're not in a rush to do it. We're not going to do something that at a price structure that we don't think is a good decision for us. But again, that's something over the coming year or so we're going to have to look into.
Got it. Okay, great. So, opening it up for questions again.
You talked about the mitigation strategies for potential late fees going away. Can you talk about the conversations you're having with your, call it, top 10 or your largest retail partners? Should we expect, if it goes through as scripted, that the RSA structures will change with them to account for the changing economics of the plan?
Yeah, you know, great, great question. So the way I would characterize our discussions is very productive. I think the one thing that our partners realize, this isn't a Synchrony issue. This is an issue for the industry, and they understand, and they, they're committed to saying, "Listen, we want to maintain the same levels of sales."... and what changes are going to have to go into place. Well, certainly they'd love to know what everyone else is going to do in the industry, you know, and other peers are going to do. That unfortunately, can't happen. so we are having discussion with them. You know, the rule kind of comes into play.
You know, the mitigants will come in, depending upon the timing of the mitigants, you know, some of that effect will run through the RSA, and that RSA will act as a buffer and offset to some of the revenue that may get suppressed if the rule goes into place. So again, I'd say productive. They understand it. They understand it's not our issue, it's an industry issue. But I think they also realize they want to keep the same level of sales, you know, on our products.
The buy now, pay later firms are starting to report their credit to the credit bureaus. I was wondering, how is that affecting your business, and what are you learning from that?
Yeah, what I'd sit back and say, there's not, we don't have a tremendous overlap with the buy now, pay later folks. I think they targeted a different consumer than we had, so we don't really see a significant. But what we think it's, we think it's good that they're actually reporting. So I think a lot of folks had, you know, stacked a lot of these loans on top of each other. And again, we always ask for a level playing field. So I think it's great that they're reporting, not a big impact to us. And most certainly, a lot of those players are now trying to migrate to other products because they realize, you know, merchants realize that they probably aren't getting the value out of it. It's very costly, so one product doesn't work.
So again, not a big impact to us. You know, we continue to watch them as they will try to create new products to try to compete with us. But we're ready. We've been here for 90 years. And we believe we have a very broad and diverse multi-product set and distribution channels to win.
Any more questions? I guess we'll just wrap it up with that then.
Great, Terry. Thank you. Thanks for the invitation.