Banking and Finance Law Daily New CFPB tool shows consumer market trends, aims to predict future risks
Friday, December 16, 2016

New CFPB tool shows consumer market trends, aims to predict future risks

By Stephanie K. Mann, J.D.

The Consumer Financial Protection Bureau has unveiled a new tool to help the public monitor developments in consumer lending and forecast potential future risks. The beta version of the tool, Consumer Credit Trends, covers the mortgage, credit card, auto loan, and student loan markets. The first Consumer Credit Trends release shows a sharp increase in mortgage origination from August to October compared to last year, growth in credit card lending to lower-income consumers, fewer auto loans to borrowers with lower credit scores, and a slight decrease in new student loans.

"Our Consumer Credit Trends tool can chart the state of consumer markets," said CFPB Director Richard Cordray. "This critical information will help us identify and act on trends that warn of another crisis or that show credit is too constricted."

Consumer Credit Trends. The CFPB has announced its plans to include other consumer credit products and information on credit applications, delinquency rates, and consumer debt levels into the tool. The tool also charts how specific groups of consumers are faring in financial markets. According to the CFPB, tracking trends over time can help warn consumers of potential problems lurking in a given market. The first Consumer Credit Trends release shows:

  • Mortgage lending between August and October up nearly 50 percent over last year: From August to October, mortgage originations were up 48.5 percent compared to the same period in 2015. Over 900,000 mortgages, totaling $243 billion, were originated in October 2016, an unusually large number likely due to a high rate of mortgage refinancing.
  • Credit card lending up nearly 14 percent year-to-date in low-income neighborhoods: About 58.9 million credit cards have been opened this year, up 9.5 percent compared to the same period last year. The increase has been larger among lower-income consumers. Credit card lending in low-income neighborhoods is up 14.2 percent compared to the same period in 2015.
  • Higher-risk auto lending down slightly: Through October 2016, 22.9 million auto loans were originated, about 0.5 percent fewer than the same period last year. The decline was concentrated among consumers with subprime or deep subprime credit scores. Meanwhile, lending to consumers 65 and older remains historically high.
  • Student lending volume down slightly: About 11.3 million student loans have been originated so far in 2016, down 1.3 percent compared to the same period in 2015.

Prepared remarks. Speaking at the CFPB Research Conference in Washington, D.C., Cordray discussed how this new tool will allow the bureau and other federal banking regulators to predict where consumer markets are heading by looking at the current state of the markets and how consumers are faring.

The charts and graphs in the Consumer Credit Trends tool can also help inform the bureau about market subcategories. "We can look at applications for credit, whether credit in these markets is tight or loose, delinquency rates, and consumer debt levels. This deeper dive into the numbers will help us assess the state of consumer credit markets across the spectrums of credit scores, communities, and income levels, and will enable us to spot developing trends," said Cordray.

Cordray concluded by emphasizing the importance of the work done at the CFPB. The goal of the bureau is not to reduce the freedom or effectiveness of economic markets, but rather to permit honest competition to flourish. The CFPB’s responsibility is to understand the marketplace in order to perceive where the market is failing to serve the interests of consumers, or where players are gaining undue advantage from unfair competition. In order to meet these responsibilities, innovations such as the Consumer Credit Trends tool provide a "digital roadmap to tell us where we have been, where we are now, and where we are going in the consumer financial marketplace."

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