June 20, 2020

Changing Climate in the Consumer Lending Marketplace: What We’re Seeing and Hearing​

Jim Stewart

Jim Stewart

CEO, Epic Research

Three Things We’re Hearing

  • Possible good news coming?
  • Asset quality trends are misleading
  • Credit card growth has stalled

Today’s newsletter takes 2 minutes to read

Possible Good News Coming?

  • The number of consumers with modified payments has risen since late March
Loans with accommodation (2)
  • Lender profitability and future loan growth is dependent on consumers’ ability to resume paying their bills
  • Epic fielded a survey earlier this week, which showed potentially positive news for the post-forbearance period:
Forbearance_Survey (1)
  • This positive news could be tempered by the fact that those receiving unemployment benefits were 21% more likely to be making payments, and those benefits will soon end.

Asset Quality Trends Continue to Mislead

  • As discussed in previous newsletters, asset quality numbers do not yet reflect the unprecedented rise in unemployment, largely due to economic stimulus and unemployment payments, along with widespread forbearance programs provided by lenders
Bankcard Delinquency Rate
  • This trend will change over the next few months as supplemental payments and forbearance programs end

Credit Card Issuer Growth Has Stalled

  • May month-end reporting reflects the trends of positive delinquency and loss rates shown above, however year-over-year growth rates have stalled:
  • Capital One reported a 3% decline in card loans
  • Discover was down 2.2%
  • And transactor-heavy American Express declined 13.3%
Revolving Debt
  • Lower growth rates will be further tested if loss-impaired profitability causes further reductions in new customer acquisition

Going Forward

  • As the summer approaches, will growth return?
  • Or will CEOs return to the failed strategy of cutting marketing and hiring too many collectors?

Thank you for reading.

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Jim Stewart

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