Current conditions in consumer lending are leading to an easing of standards and warrant additional caution by lenders, said Siddarth “Bobby” Mehta, former chief executive of TransUnion, while speaking at LendItUSA in New York last week.
“What I get concerned about is the cascading relaxation of underlying standards,” Mehta said. “When lending gets competitive, the length of the loan increases, and the size of the loan increases. In these conditions, every incremental decision you make is fine – but then you look back in retrospect and see you’ve relaxed standards across the industry.”
Mehta also noted that a rise in defaults should be expected despite widespread deleveraging of consumer debt burdens in recent years. “Interest rates will go up,” he said. “The consumer will get stressed.”