Consumer Credit Expands, But At A Slower Pace

According to the Federal Reserve Board’s G.19 Consumer Credit report, the total amount of consumer credit outstanding rose by 2.6 percent (SAAR) over the month of April 2017 to $3.82 trillion. Revolving credit, which is largely composed of credit card debt and represents $1.01 trillion, rose by 1.8 percent while non-revolving credit, which encompasses auto and student loans and totals $2.81 trillion, grew by 2.9 percent.

Although growth in consumer credit slowed in April, a previous post documented its significant expansion in recent years. Total household debt, consumer installment loans and real-estate secured loans, has returned to its 2008 peak level. However, growth in total household debt has been led by the expansion in consumer installment debt as opposed to mortgages and HELOCs. Specifically, student and auto loans have experienced rapid growth while the outstanding amount of credit cards and other consumer loans remains below their 2008 levels.

Banks account for the majority of consumer credit holdings. Information provided by the first quarter of 2017 iteration of the Federal Reserve Board’s Senior Loan Officer Opinion Survey (SLOOS), which surveys loans officers at banks, indicates that, for the majority of consumer credit, lending standards tightened on auto loans but eased on credit cards and other consumer loans.

According to the figure above, credit standards on credit card applications eased on net. Credit standards on applications for auto loans tightened over the quarter, but were neutral for consumer loans other than credit card and auto loans. Net easing occurs when the difference between the total percentage of senior loan officers reporting easier standards at their respective bank exceeds the proportion indicating that standards were tighter. Net tightening reflects the reverse, the proportion of senior loan officers reporting easier standards is less than those indicate that standards were tighter.

However, a previous post found that the vast majority of bank-owned consumer credit is held by the largest banks, those with assets in excess of the $1 billion. While earlier analysis found that these banks account for more than 90 percent of bank holdings of consumer credit, the author’s calculations from FDIC data indicate that banks with assets in excess of $1 billion account for 9.41 percent of all FDIC-insured depository institutions.

Analysis of the large bank respondent’s answers yields similar results for net lending standards on credit cards and auto loans. On net, standards at large banks eased over the first quarter of 2017 on credit cards, but there was net tightening on auto loans. However, large banks also reported net easing of credit standards on other consumer installment loans as well. Large banks account for 93 percent of other consumer loans to individuals.

 



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