There is little interest in a new consumer credit product being offered by banks to help customers restore credit ratings battered by the financial crisis, according to a new survey from the Deloitte Center for Financial Services.

Despite heavy marketing by banks, only 4 percent of first-time defaulters – an emerging customer segment Deloitte is tracking – are extremely interested in obtaining a secured credit card according to the survey. A secured credit card requires consumers to make a deposit against a line of credit on the account or is linked to a savings account and that is designed to help them improve their credit ratings. Overall, less than 1 in 5 consumers in the segment (18 percent) have any real interest in the product.

The Deloitte Center for Financial Services defines first-time defaulters as consumers who have suffered a serious negative credit situation for the first time since mid-2008, such as delinquency, foreclosure, bankruptcy and charge-offs. More than 1 in 10 consumers overall (11 percent) fall into this category in the latest survey, conducted in April and May, mirroring findings from a Deloitte study in 2010.

"Consumers are struggling with the repercussions of the faltering economy," saidAndrew Freeman, executive director of the Center for Financial Services, Deloitte LLP. "The significance of this survey is that it shows little change in the overall level of first-time defaulters."

Freeman added, "One of the biggest challenges today is how banks price their products for risk. A secured credit card is one such product that a number of lenders are offering first-time defaulters. The expectation – based on historical experience – is that secured cards and other alternative credit products will be the only source of consumer credit for individuals who have had significant credit trouble. However, this group appears to have continued access to revolving credit products at this time."

The survey also shows a "knock-on effect" – a secondary, often unintended consequence – taking place among some first-time defaulters as expense obligations mount and consumers battle reduced income. While reduced income and unemployment remain top concerns for first-time defaulters, they now also have to contend with growing medical bills.

"When you lose your job, you often lose your health insurance coverage after six months or a year. The reality of this and the shift in debt obligation priorities are reflected in the numbers," said Freeman.

Additional survey findings among first-time defaulters include:

• More than half plan to pay down their overall debt over the next 12 months – a positive sign.
• Consumers just above the subprime credit score range are defaulting for the first time more frequently than consumers in Deloitte'sAugust 2010survey.
• Recent first-time defaulters have more trust in financial institutions than those defaulting betweenSeptember 2008andAugust 2010; overall two-thirds of first-time defaulters are satisfied with their primary bank.
• Perceived poor service and high fees are motivators for first-time defaulter to switch lenders though few are doing so.

Among the broader group of almost 3,500 consumers in this survey, three other survey findings stand out:

• Although satisfaction with primary banks is slightly lower sinceAugust 2010, overall most consumers say they trust their primary bank. As for confidence levels in financial institutions outside of their primary bank, trust is generally low, especially among larger banks.
• Only about half of respondents expect to be treated as valuable customers by their lenders.
• Nearly half the larger survey sample has not obtained any new credit product sinceSeptember 2008and only 1 in 5 (20 percent) are likely to pursue credit over the next 12 months.