NY Fed Sees Increase In Access To Consumer Credit

The Federal Reserve Bank of New York painted a more optimistic picture of U.S. households, saying access to credit has improved at the same time that their risk of a financial shock has declined.

According to a Reuters news report, a survey of consumer expectations conducted by the New York Fed found that respondents who were told not to apply for credit during the last 12 months has dipped by 4.9 percent as of October. This marks a downward trend that has continued since the start of the survey in 2013. Reuters noted the survey is conducted every four months.

In addition to improved access, the survey also showed an increase in the number of U.S. consumers applying for and obtaining credit. What’s more, there was a reduction in the number of rejections of credit applications. The survey also showed the likelihood of respondents needing $2,000 in unexpected costs within the next month increased to 33 percent, up from 32 percent probability in the past survey. The chance that consumers will be able to come up with those funds increased to 70 percent from 67 percent.

The survey results from the Federal Reserve Bank of New York come as Wells Fargo’s CFO, John Shrewsberry, said at an industry conference last week that he isn’t concerned consumers are having a tough time paying back their debts. According to news from Reuters, Shrewsberry said that banks are being competitive in getting consumers to use their credit cards, but that easy access to credit hasn’t led to meaningful credit card defaults yet.

“That’s probably at the margin where excess leverage will show up. I don’t think it’s happened yet,” he stated. What’s more, the CFO said that the prices of used vehicles are at reasonable levels, so lenders’ losses won’t be as significant if a consumer were to default on a loan. “I don’t think banks, incidentally, are going to get the worst if auto credit goes sideways. I think that will be finance companies, more likely,” he continued.

As for the bank’s mortgage and consumer lending business, the executive said that Wells Fargo is focused largely on prime jumbo loans that have little chance of defaulting. He said home equity loan activity is currently “very slow.”


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