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CFPB publishes a report on consumer financial sentiment
On November 20, the CFPB published a report titled, “Making Ends Meet in 2024” which provided analysis of the financial stability and well-being of consumers, and revealed a decline from 2023 to 2024. As described by the Bureau, this deterioration was observed across many demographic groups and measures, with overall financial well-being, as assessed by the CFPB’s scale, falling from 51 in 2023 to 48.7 in 2024. To measure overall financial well-being, the scale combined several questions about whether people can meet current and ongoing financial obligations, feel secure in their financial future, and are able to make choices that allow them to enjoy life. The share of consumers with the lowest financial well-being increased from 16 percent to 22 percent. More households reported difficulties in paying bills or expenses, rising from 38 percent in 2023 to 43 percent in 2024, and fewer households which could only cover a month of expenses or less if they lost their main source of income also increased from 40 percent in 2023 to 42 percent in 2024.
The report placed overall financial health around where it was in 2019, and slightly worse by some measures, after a sharp improvement in financial health that began in 2020. The CFPB listed high inflation, housing costs, high interest rates, and the resumption of student loan payments as potential contributing factors to this decline. Large disparities in financial stability and health continue across income, racial and ethnic groups, with 65 percent of Black households and 55 percent of Hispanic households unable to cover expenses for more than a month, compared to 35 percent of non-Hispanic white households.
Income variability also remained a significant issue, with 31 percent of households reporting that their income varies somewhat or a lot each month, a figure unchanged from 2023, but higher than the 24 percent reported in 2019. The Bureau found that access to credit also remained difficult, with 40 percent of consumers applying for credit in 2024, slightly down from 42 percent in 2023. Of those who applied, 39 percent were turned down or did not receive the full amount requested, and 27 percent of all consumers did not apply due to fear of being turned down.
The report also highlighted how many families struggled regularly with their finances, with 44 percent of consumers stating that “my finances control my life” always or often, and 33 percent reporting that they rarely or never “have money left at the end of the month.” Additionally, 36 percent of consumers indicated that the phrase “I am just getting by financially” describes them completely or very well.
The Bureau noted that the report and these Making Ends Meet surveys are part of its continuing statutory mandate to perform research and analysis on consumer finances and indicated that ensuring timely reporting of financial health and stability measures will enable an understanding of risks to consumer finances.
FDIC reports lowest unbanked rate since start of survey
On November 12, the FDIC released its biennial survey of unbanked and underbanked households revealing that the unbanked rate in the U.S. fell to a historic low of 4.2 percent in 2023. This rate decreased from 4.5 percent in 2021 and marked a significant drop from a high of 8.2 percent in 2011. First conducted in 2009, the survey noted about 5.6 million households were unbanked in 2023.
The survey also highlighted that households consisting of minority groups continued to have higher unbanked rates compared to their counterparts. For the first time, the 2023 survey included questions about the use of Buy Now, Pay Later (BNPL) services, revealing that 3.9 percent of households used BNPL in the past 12 months.
FDIC Chairman remarks on 2024 Small Business Lending Survey
Recently, FDIC Chairman Martin Gruenberg remarked on the 2024 Small Business Lending Survey (SBLS) report at a community banking conference. He highlighted that technological advancements have not altered the relationship-oriented nature of small business lending in a fundamental way. The SBLS report, which, as previously covered by InfoBytes, provided insights into small business lending practices based on data collected in 2022, including loan approval processes, geographic markets, competition, use of financial technology, and lending to start-ups. Gruenberg explained that the report revealed that while banks adopt more financial technologies, the underwriting and approval processes for small business loans remain staff-intensive. Only 3 percent of banks fully automate the underwriting of some loans, and only 5 percent allow borrowers to complete the loan process entirely online.
As Gruenberg explained, the SBLS report also underscored the critical role of branches and staff in maintaining relationships with small business customers. About 80 percent of banks defined their small business lending market based on branch locations, with borrowers typically found within 40 miles of these branches. Community banks leverage “soft” information, such as a loan officer’s assessment, to make credit decisions, setting them apart from larger banks. This approach enables community banks to serve a broader range of small business borrowers, including startups, without relying heavily on government-guaranteed lending programs.
CSBS report reveals regulatory burden as top community bank concern
Recently, CSBC published its 2024 Annual Community Bank Survey which provides insights into the concerns and challenges faced by community banks. The survey revealed that regulatory burden has become the primary concern for community bankers, which is a shift from last year’s primary concern about the cost of funds, which now ties as a leading external risk. The survey includes responses from 370 community bankers across 38 states, and highlights issues such as compliance costs, technology, competition, and liquidity.
CSBS President and CEO Brandon Milhorn noted that while last year banks were concerned about a recession, this year their focus has shifted to the cost of compliance due to increased federal regulatory and supervisory activity over the past 18 months. He emphasized the need for regulators to concentrate on core financial risks and avoid unnecessary regulatory burdens on community banks.
Other significant concerns reported include cost of funds reflecting a high-interest rate environment, net interest margins, and deposit growth. Cybersecurity continues to be viewed as the highest internal risk. Bankers also indicated that inflation-related challenges are expected to persist but are manageable. The most significant impacts of inflation are on the costs of deposits, personnel expenses, the value of securities investments, and operating expenses.