The first economic survey to specifically track what consumer credit lenders are seeing in the U.S. economic marketplace.
Latest C3 Survey Shows Increasing Optimism About Business Conditions
Consumer Finance Companies Report Improved Conditions in Q4
Consumer finance companies’ assessments of the current and prospective business environment improved significantly in Fourth Quarter 2024 according to the results of AFSA’s latest Consumer Credit Conditions Index Survey (C3 Survey).
Each quarter, survey respondents share their views on the current business situation, as well as their expectations for changes in the consumer-lending environment over the next six months, including consumer loan demand, lender funding costs, and loan performance. Survey participants include lenders offering traditional installment loans, vehicle financing and other types of consumer loans. The latest survey was conducted in the second half of January 2025.
Lender expectations are consistently positive across all business indicators. Twice as many respondents reported that overall business conditions strengthened during the last three months of 2024 than reported conditions weakened. The Net Increasing Index (NII) – the percentage of lenders that reported conditions strengthened minus the percentage that reported conditions weakened – increased for the fourth consecutive quarter, reaching +21.4. The NII was a smaller +4.9 in the third quarter and was negative in the first half of the year. A negative reading indicates that more respondents claimed conditions weakened than reported them improved.
Lenders’ views on the six-month-ahead outlook were considerably more optimistic on balance than at any time in the last year.:
- The “Net Improving Index (NII),” the percentage of respondents reporting that conditions improved minus the percentage reporting they worsened, measured +21.4, the highest in the four quarters in which the survey has been conducted to date. This was well above readings of -19.3, -8.3, and +4.9, respectively, in the first through third quarters of 2024.
- Lenders’ views on the six-month-ahead outlook were considerably more optimistic on balance than at any time in the last year. The NII measured +50.0, with a large majority (61.9 percent) of respondents expecting overall business conditions to improve over the next six months compared to 26.2 percent expecting them to remain largely unchanged and 11.9 percent expecting them to deteriorate. The NII improved has improved from +18.9 in the third quarter and -4.2 in the second quarter and measured +8.9 in the first quarter.
- Survey participants were asked whether they expect customer demand for loans, funding costs, and outstanding loan performance to improve, worsen, or stay the same over the next six months. NII’s for each of these business indicators were comfortably in positive territory.
AFSA Survey Points to Light at the End of the Tunnel for Consumer Lenders
Consumer Finance Companies’ Assessment of the Business Environment Improved in Q3 2024
The last few years have been challenging for consumers and providers of consumer credit alike. An historically sharp increase in interest rates, a slow slide in economic growth following a post-pandemic boom, growing household financial strain, and an increasingly adversarial regulatory climate are among the factors that have weighed on borrowers and lenders.
Results from AFSA’s latest Consumer Credit Conditions Index (C3) survey of its members, however, suggest that the tide may be turning. Each quarter, survey respondents share their views on current business indicators, as well as their expectations for changes in the consumer-lending environment for the next six months.
Consumer finance companies’ assessments of the business environment improved in the third quarter. More respondents reported strengthened overall business conditions compared to the previous three-month period than reported weakened conditions. Moreover, respondents said they expect overall conditions to further improve during the next six months. These latest results represent a reversal from the previous quarter’s.
The survey results indicate that the business environment for consumer credit providers improved modestly on net in the third quarter of 2024 compared to the second quarter:
- The “Net Improving Index (NII),” the percentage of respondents reporting conditions improved minus the percentage reporting they worsened, measured +4.9, well above readings of -19.3 and -8.3, respectively, in the first and second quarters of 2024.
- More than 36 percent of respondents reported conditions improved compared to 31.7 percent who claimed they weakened. Just under 32 percent said condition were basically unchanged.
- Lenders’ views on the six-month ahead outlook also improved in the third quarter. The NII measured +18.9, with 43.2 percent of respondents expecting overall business conditions to improve over the next six months, 24.3 percent expecting them to deteriorate, and 32.4 percent expecting them to remain largely unchanged. The NII in -4.2 in the second quarter and +8.9 in the first quarter.
- Survey participants were asked whether they expect customer demand for loans, funding costs, and outstanding loan performance will improve, worsen, or stay the same over the next six months. The NII for expected loan demand remained positive in the third quarter at +23.7. That was an improvement from +14.9 in the second quarter but was lower than the first quarter reading of +30.4. The NII for expected cost of funds increased to +54.1, up from +39.6 in the second quarter and +21.8 in the first quarter. The NII for expected loan performance remained in the negative, but at -2.6, was higher than in both the first and second quarters of the year.
AFSA Survey of Consumer Credit Industry Shows Economic Strains, with Increased Demand for Credit from Consumers
Business Environment for Lenders Continues to Weaken in the Second Quarter of 2024
The American Financial Services Association released its quarterly Consumer Credit Conditions (C3) Index survey of leading providers of consumer credit, including mortgages, vehicle financing, personal installment loans, and credit cards.
The C3 Index is the only national survey that provides a look into AFSA member companies’ perceptions of business conditions and key business indicators, including how they see the consumer-lending environment evolving in the coming months. The C3 Index provides industry insights beyond what is available in other economic surveys or government statistical reports.
High interest rates, stubborn inflation, stressed and anxious consumers and a hostile regulatory climate are raising headwinds for the consumer finance industry. This is reflected in the 2nd Quarter results of AFSA’s C3 Index, which shows the business environment for consumer lenders continued to weaken in the second quarter of 2024. Moreover, the outlook for conditions over the next six months was slightly negative in the second quarter, a reversal of the modestly positive expectations reported in the 1st Quarter survey.
The margin between those reporting overall worsened vs. improved business
conditions narrowed, but lenders’ views on the next six months are not optimistic.
- The percentage of respondents reporting conditions improved vs. those who reported worsening conditions was higher than in the previous survey. Of those surveyed, 29.2% reported conditions worsened in Q2, 20.9 percent said they improved, and half (50%) claimed they were unchanged. In Q1, 38.6% reported conditions worsened, 19.3% said they improved, and 42.1% claimed they were unchanged.
- When asked if customer demand for loans, funding costs, and performance of outstanding loans improved, worsened, or stayed the same in Q2, respondents felt loan demand improved on balance, but that funding costs and loan performance worsened.
- 29.2% of respondents expect overall business conditions to worsen over the next six months, 25% expect improvement, and 45.8% percent expect them to remain largely unchanged, a reversal from the first quarter, when more respondents expected improved rather than weaker conditions.
- Survey participants were asked whether they expect customer demand for loans, funding costs, and outstanding loan performance will improve, worsen, or stay the same over the next six months. While expected loan demand and expected funding costs remained positive in Q2, expected loan performance was increasingly negative in Q2 compared to Q1 sentiment.
“The C3 Index offers a unique perspective on the consumer credit industry. Leading into our national elections, this data highlights the ongoing concerns both consumers and credit providers are facing in uncertain economic times.”
AFSA President & CEO bill Himpler
“These results highlight the challenging environment facing consumer lenders in 2024. While it is encouraging to see some signs of optimism relected in the survey, the headwinds facing consumers and our industry cannot be minimized.”
AFSA chief economist and VP for research TIM GILL
AFSA Survey Shows Consumer Credit Conditions Deteriorated in Q1 2024
Twice as Many Lenders Say Conditions “Worsened” Compared to “Improved”
The American Financial Services Association released its inaugural Consumer Credit Conditions (C3) Index, the first economic survey to specifically track what consumer credit lenders are seeing in the U.S. economic marketplace.
Looking at the first quarter of 2024, credit companies saw deteriorating conditions, with twice as many lenders reporting that conditions worsened over the first three months of the year. However, nearly 34% of lenders expect improved consumer credit conditions in next six months.
Most consumers and businesses need access to some form of credit to meet their financial needs, to cover unexpected expenses, or to gain some financial flexibility in tight financial times. The C3 Index provides insights from vehicle and mortgage lenders, credit card and personal installment companies, into where they see conditions for making that credit available for consumers to buy many of the goods and services they need.
The results show conditions facing consumer lenders deteriorated on balance in the first quarter of 2024, compared to the fourth quarter of 2023:
- Twice as many lenders said that business conditions worsened in Q1 (38.6 percent) versus improved (19.3 percent). The “Net Improving Index (NII)” – the percentage of those reporting improving conditions minus the percentage reporting worsening conditions – was -19.3 percent. Conditions were basically unchanged in Q1, according to 42.1 percent of survey participants.
- Participants evaluated whether customer demand for loans, funding costs, and performance of outstanding loans improved, worsened, or stayed the same in Q1 2024 compared to Q4 2023. Every category saw indicators worsen. NIIs for loan demand, funding
costs, and loan performance, respectively, measured -14.5, -12.7, and -3.5. - Lenders expressed a greater degree of forward-looking optimism over the next six months, with 33.9 percent saying conditions will improve vs. 25 percent expecting them to worsen, for an NII of +8.9.
- The NII for future loan demand outlook was +30.4, while the NII for the six-month funding cost outlook was +21.8. However, survey respondents remained pessimistic on balance (NII of -5.3) regarding the six-month outlook for the performance of outstanding loans.
“The C3 Index provides consumer-facing businesses with the perspectives of those who put money in the pockets of households that spend that money on groceries, clothing, school supplies, home repairs, vacations, just about everything.”
AFSA President & CEO bill Himpler
“The Q1 2024 survey results point to broad-based deterioration in consumer lending business conditions to start the year. It is encouraging, though, that some improvement is anticipated over the next several months as the headwinds facing the economy are expected to begin to ease.”
AFSA chief economist and VP for research TIM GILL