The British are Dunning, The British are Dunning: The UK Tightens Up Card Lending

by Brian Riley 0

So, here it is.  We said it, they said it, and it is now happening.

The UK tightens up consumer credit as regulators identify a shifting market.  Anyone in Washington listening?

  • Britain’s consumer borrowing boom may be about to hit a wall.

  • According to a Bank of England survey published Thursday, lenders are starting to see an increase in defaults and have tightened the criteria they set for borrowers.

  • The change comes in the wake of multiple warnings from regulators that the pace of borrowing, with credit growth still running close to 10 percent a year, poses a risk to financial stability.

Growth is exciting but as the US market toils with credit bureau breach risks yet to be identified, plus deteriorating card portfolios, it probably makes sense to tap on the brakes a little so portfolio risk can settle.  Plus, with quarterly results coming up next week, conservatism is probably in order since US issuers will likely show deterioration in credit quality.

  • “Motivations for this included concerns about customer indebtedness and the squeeze in real incomes,” the BOE said in the survey.

The US credit model still works well but the more conservative UK position at least warrants a look by lenders… before the regulators get there.

Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group

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