Lend Academy Network Forum

General Category => General P2P Lending Discussion => Topic started by: Fred93 on June 29, 2020, 06:35:29 AM

Title: WSJ: flying blind into a credit storm
Post by: Fred93 on June 29, 2020, 06:35:29 AM
WSJ is paywalled.  Article says banks don't know who is going to pay them back, so they are pulling back across the board.

https://www.wsj.com/articles/flying-blind-into-a-credit-storm-widespread-deferrals-mean-banks-cant-tell-whos-creditworthy-11593423001?mod=hp_lead_pos5
Quote
...Millions of Americans are out of work and behind on their debts. But, in many cases, the missed payments aren’t reflected in their credit scores, nor are they uniformly recorded on borrowers’ credit reports.

The confusion stems from a provision in the government’s coronavirus stimulus package. The law says lenders that allow borrowers to defer their debt payments can’t report these payments as late to credit-reporting companies. From March 1 through the end of May, Americans deferred debt payments on more than 100 million accounts, according to credit-reporting firm TransUnion, a sign of widespread financial distress.

The credit blind spot has further clouded the outlook for lenders.  ...

Interesting that the legislators wrote into the law a provision to keep banks from reporting deferrals, in the hope that deferral would not reduce availability of credit to these individuals, and this has had the opposite effect of the one desired.  They've reduced the availability of credit to everyone. 

LC sees this pullback as their customers (banks, who buy loans from LC) disappearing.

Title: Re: WSJ: flying blind into a credit storm
Post by: Rob L on June 29, 2020, 10:31:32 AM
We have a number of credit cards we rarely if never use. Pretty much put all our CC purchases on our 2% cash back CitiBank Mastercard. This past week one was cancelled (Capital One) and the limit on the other (Chase) was lowered. Our FICO is excellent but I understand this is a sensible risk reduction on their part.
Title: Re: WSJ: flying blind into a credit storm
Post by: nonattender on July 02, 2020, 11:03:00 PM
Ditto.

Only happened on one retail card, but I had two from that issuer.  $15k limit chopped down to $1024 - which is odd, in itself - back in April or so... (My last PIF on it was >$4k, FICO always north of 800).

Someone at Synchrony doesn't know shit about credit algorithms and went nutso slash and burn on a good customer + SYF shareholder.

(Maybe all of that Amazon card exposure, when Amazon was the only retail store open in the whole country, made them really nervous.)

Chase is the other issuer for Amazon, so that might explain yours, too, Rob.
Title: Re: WSJ: flying blind into a credit storm
Post by: rawraw on July 04, 2020, 09:16:47 PM
Got to get those risk weighted assets ready for credit losses 😊
Title: Re: WSJ: flying blind into a credit storm
Post by: nonattender on July 05, 2020, 01:05:26 AM
Hah, yep.  I made a call and... bingo.

On the upside, I hear it's not as bad as they thought it might be, given that people were quite likely to keep those accounts in good standing, for some reason... :)
Title: Re: WSJ: flying blind into a credit storm
Post by: Rob L on August 08, 2020, 10:26:12 AM
Interesting read from the NY Fed:

Total Household Debt Decreased in Q2 2020, Marking First Decline Since 2014
https://www.newyorkfed.org/newsevents/news/research/2020/20200806 (https://www.newyorkfed.org/newsevents/news/research/2020/20200806)
Title: Re: WSJ: flying blind into a credit storm
Post by: nonattender on August 26, 2020, 10:38:00 PM
In other news, I accidentally charged a couple of hundred bucks on that Synchrony-issued card that had had its limit chopped in March or so.  The bill showed up in the last few days and my credit limit had been adjusted back up to $10k.  Wonder what they have learned now.
Title: Re: WSJ: flying blind into a credit storm
Post by: Rob L on August 31, 2020, 10:37:33 AM
Interesting artcle but says what we already knew.

https://www.advisorperspectives.com/articles/2020/08/28/capital-one-cuts-card-limits-amid-u-s-jobless-aid-impasse (https://www.advisorperspectives.com/articles/2020/08/28/capital-one-cuts-card-limits-amid-u-s-jobless-aid-impasse)

Capital One cut the limit on my business card last week. Doesn't matter to me but wonder if there aren't plenty of other businesses that it would.
Title: Re: WSJ: flying blind into a credit storm
Post by: Debt Free on September 01, 2020, 11:15:41 AM
Yes, they cut my business credit line in half as well.  Only affect is the change in debt-to-limit ratio.  Funny though that at my brick and mortar bank, BECU tripled my limit which negated what Capital One did.