Tightening Standards Begin: Credit Card Transactions Begin to Sputter

by Brian Riley 0

credit cards

So, the credit card tightening we talked about last year begins, as noted in today’s WSJ.  The article points to data published by the Federal Reserve Bank which summarizes whether loan officers feel their decisions are on par with prior periods, more rigid, or more aggressive..

  • Since 2011, the Federal Reserve’s quarterly senior loan officer survey had consistently found a net loosening of credit standards in consumer loans and credit cards.
  • That began to shift at the end of 2016, though. More respondents said they tightened credit standards than not in four of the past five quarterly surveys.

This boils into tighter credit, reducing cardholder credit availability, meaning less money to spend.

  • …Cantor Fitzgerald strategists pointed to another possible cause, saying that tightened lending standards … may be squeezing consumer finances.
  • Credit card lenders, including Capital One and Synchrony Financial have confirmed that they tightened lending standards over the last two years in response to rising defaults or delinquencies. So, too, have auto lenders like Santander Consumer.
  • When this happens, consumers with lower credit scores will find it harder to secure auto loans or new credit card lines.

If you’re forecasting  accounts, revenue, or volumes, now is a good time to point the turrets downward.

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

Read the quoted story here