Citizens Financial Says No to Car Loans From Dealers

Citizens Financial Group will stop originating indirect car loans effective July 1.

The financial institution will retain and continue to service the existing auto loans on its balance sheet, Citizens said in a Wednesday (June 7) press release.

“As Citizens continues to optimize its balance sheet, this decision further enables us to lend in areas that provide better risk-adjusted returns and improved opportunities to deepen relationships with our customers,” Citizens Head of Consumer Lending Eric J. Schuppenhauer said in the release.

Citizens had already begun to de-emphasize its auto loan origination volume and reduce the number of active dealership relationships, according to the press release.

The $11.5 billion of auto loans outstanding the financial institution had on March 31 was 6.5% lower than the total it had at the end of the previous quarter, on Dec. 31, 2022, and 20.1% lower than that it had a year earlier, on March 31, 2022, the release said.

“We greatly appreciate the opportunity to have been the lender of choice for thousands of dealership partners over the years and are thankful for the dedicated team of colleagues that have delivered exceptional service,” Schuppenhauer said in the release.

PYMNTS reported May 3 that the auto loan delinquency data from bank earnings over the past several weeks signal that consumers are falling behind on payments.

For example, Wells Fargo reported a delinquency rate of 2.3%, up from 1.7% a year earlier; JPMorgan said its 30-day-plus delinquency rate was up to 0.9% from last year’s 0.6%; and Ally Financial showed a 30-day-plus delinquency rate that jumped to 3.2% from 2% a year earlier.

This report comes at a time when the Federal Reserve Board reports that a record number of consumers say they are worse off than they were a year ago.

Thirty-five percent of households said they were worse off in 2022 than a year ago, according to the Fed report, “Economic Well-Being of U.S. Households.”

That’s the highest level of households saying that since the question was first posed by the central bank in 2014 — and it’s up from 20% just a year earlier.