Newsroom

October 11, 2011

CUs' consumer lending outpaces industry

The recent string of consecutive consumer credit increases came to a halt in August, but credit unions reported a stronger pace of consumer lending than overall financial institutions.

The Federal Reserve reported Friday that total consumer installment credit, a measurement that does not include real estate-secured loans, fell 4.6 percent to $2.44 trillion on a seasonally adjusted, annualized basis. NAFCU Chief Economist Tun Wai noted that it was the first monthly decline since September 2010.

For financial institutions overall, non-revolving credit decreased at an annual rate of 5.1 percent to $1.65 trillion, while revolving credit decreased 3.4 percent to $790.1 billion. Wai said the drop in non-revolving credit was "particularly surprising" since student loan balances have been trending upward. "It was the first time in a year that non-revolving credit dropped, and the decrease was the largest in three years," he noted.

The picture was a little rosier at credit unions, with total consumer lending up $2.4 billion from July's level to $225 billion on a non-seasonally adjusted basis. This annualized increase of 12.9 percent for credit unions compares with an annualized increase of 6.3 percent for financial institutions overall on a non-seasonally adjusted basis.

Both non-revolving and revolving credit lending were up at credit unions. Non-revolving credit grew $2.1 billion to $188.7 billion, while revolving credit increased $0.3 billion to $36.3 billion. At the same time, credit unions' share of total consumer installment credit rose from 9.12 percent in July to 9.17 percent in August.

Though August was a relatively good month for credit unions on the consumer lending front, Wai said the overall numbers indicate that many consumers are choosing to focus on paying down debt rather than borrow. "There is also a lack of confidence generally about the economy and the job market, and that has slowed spending on non-essential goods."

Looking ahead to the next few months, Wai said that he would not be surprised if credit unions continue to report a stronger pace of consumer lending than the overall industry total. "NAFCU has been hearing from credit unions all over the country that they are getting a lot of interest from people upset with big banks charging new debit and checking fees, and that sentiment may drive growth in lending as well. Those fees may result in more people choosing credit unions as their primary financial institution."