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Financial Services Law Insights and Observations

CFPB: Credit applications rebound to pre-pandemic levels

Federal Issues CFPB Covid-19 Consumer Finance Consumer Lending Auto Finance Mortgages Credit Cards

Federal Issues

On July 27, the CFPB published a special issue brief finding that consumer applications for auto loans, new mortgages, and revolving credit cards had, for the most part, returned to pre-pandemic levels by May 2021. The brief compares the number of applications made in these categories before the pandemic to the number being made now and provides a state-by-state analysis of the change in applications. Highlights of the brief include: (i) sub-prime borrower credit applications increased in conjunction with federal stimulus payments; (ii) auto loan inquiries dropped 52 percent by the end of March 2020 but returned to their usual pre-pandemic trend by January 2021; however, the Bureau reports wide geographic variability in the demand for auto loans while changes in credit card applications were generally uniform; (iii) new mortgage credit inquiries experienced a smaller drop in March 2020 compared to other credit types but later saw a surge, with inquiries exceeding the usual, seasonally adjusted volume by 10 to 30 percent—a reflection of unusually high activity seen throughout the pandemic; (iv) revolving credit card inquiries declined by over 40 percent and took the longest to rebound, not returning to normal levels until March 2021; and (v) consumers with deep subprime credit scores represented the largest decline in auto loan inquiries compared to prior years, followed by inquiries from consumers with subprime credit scores, with both categories of consumers also showing declines in new mortgage and revolving credit card inquiries. “While consumer credit applications have generally recovered to pre-pandemic levels in the aggregate, we see important differences across consumers,” acting CFPB Director David Uejio stated. “Both borrowers with superprime and subprime credit scores are still not applying for credit as much as they were pre-pandemic. We will continue to keep a close watch on the marketplace as the economic recovery continues, to help ensure all consumers have access to financial products and services that are fair, transparent, and competitive.”

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