New AFSA Survey Shows Consumer Credit Conditions Deteriorated in Q1 2024; Twice as Many Lenders Say Conditions "Worsened" Compared to "Improved"

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American Financial Services Association

Apr 18, 2024, 08:00 ET

However, nearly 34% of lenders expect improved consumer credit conditions in next six months

WASHINGTON, April 18, 2024 /PRNewswire/ -- The American Financial Services Association (AFSA) today released its Consumer Credit Conditions (C3) Index, based on a survey of leading mortgage, vehicle finance, personal installment, and credit card providers. Participants shared their views on several key business indicators, including how they see consumer lending evolving in the coming months.

This first-of-its kind quarterly survey contributes crucial insights on the consumer credit industry and its relationships with consumers, beyond what is available in other industry sentiment surveys or government reports.

"The C3 Index provides consumer-facing businesses with the perspectives of those who put money in the pockets of households that spend that money on groceries, clothing, school supplies, home repairs, vacations, just about everything," said AFSA President and CEO Bill Himpler. "Tax Day this week was a reminder of the many expenses consumers face and the stress that consumers and credit providers alike experience with economic uncertainty and regulatory hostility."

The survey's results show conditions facing consumer lenders deteriorated on balance in the first quarter of 2024, compared to the fourth quarter of 2023:

Twice as many lenders said that business conditions worsened in Q1 (38.6 percent) versus improved (19.3 percent). The "Net Improving Index (NII)" – the percentage of those reporting improving conditions minus the percentage reporting worsening conditions – was -19.3 percent. Conditions were basically unchanged in Q1, according to 42.1 percent of survey participants.
Participants evaluated whether customer demand for loans, funding costs, and performance of outstanding loans improved, worsened, or stayed the same in Q1 2024 compared to Q4 2023. Every category saw indicators worsen. NIIs for loan demand, funding costs, and loan performance, respectively, measured -14.5, -12.7, and -3.5.
Lenders expressed a greater degree of forward-looking optimism over the next six months, with 33.9 percent saying conditions will improve vs. 25 percent expecting them to worsen, for an NII of +8.9.
The NII for future loan demand outlook was +30.4, while the NII for the six-month funding cost outlook was +21.8. However, survey respondents remained pessimistic on balance (NII of -5.3) regarding the six-month outlook for the performance of outstanding loans.

"The C3 Index fills the need for focused indicators for lenders, policymakers, consumer-facing businesses and the public to track this crucial sector of the economy," said Tim Gill, AFSA chief economist and VP for research. "The Q1 2024 survey results point to broad-based deterioration in consumer lending business conditions to start the year. It is encouraging, though, that some improvement is anticipated over the next several months as the headwinds facing the economy are expected to begin to ease."

More information on the C3 Index, including detailed results and a description of the methodology, is available at www.caseforcredit.com.

About American Financial Services Association (AFSA):

Founded in 1916, the American Financial Services Association (AFSA) is the primary trade association for the consumer credit industry, protecting access to credit and consumer choice. AFSA provides the consumer credit industry and the consumers it services with a voice in Washington, D.C., where the association is headquartered, and access to the media and investment community. It also provides policy advice and issues management at both the federal and state level. To learn more about AFSA, go to https://afsaonline.org/.

SOURCE American Financial Services Association