1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:06,960 --> 00:00:08,480 Speaker 2: We're going to move to discuss the state of the 3 00:00:08,480 --> 00:00:10,920 Speaker 2: credit and loan markets with a perfect person here, Lending 4 00:00:10,920 --> 00:00:14,880 Speaker 2: Club CEO Scott Sanborn. Really moving here from the commercial 5 00:00:14,880 --> 00:00:17,520 Speaker 2: real estate markets to the consumer market. Great day to 6 00:00:17,520 --> 00:00:19,639 Speaker 2: talk about the consumer with you, Scott, Thank you for 7 00:00:19,720 --> 00:00:23,760 Speaker 2: joining us. You've seen consumer credit here just sore past 8 00:00:23,800 --> 00:00:27,360 Speaker 2: a trillion dollars in the United States alone from where 9 00:00:27,440 --> 00:00:32,680 Speaker 2: you sit. Is that kind of growth and credit sustainable, Well. 10 00:00:32,520 --> 00:00:35,480 Speaker 1: It's certainly sending a message about the state of the consumer. 11 00:00:35,560 --> 00:00:38,000 Speaker 1: Who's had to deal with, you know, the worst inflation 12 00:00:38,080 --> 00:00:40,360 Speaker 1: we've seen since the eighties, and part of the way 13 00:00:40,400 --> 00:00:43,479 Speaker 1: that dealt with that is by increasing the amount of debt, 14 00:00:43,560 --> 00:00:45,559 Speaker 1: specifically on credit cards. 15 00:00:45,760 --> 00:00:47,680 Speaker 3: The problem with it is that. 16 00:00:47,560 --> 00:00:50,159 Speaker 1: We are now at a place where nearly half of 17 00:00:50,200 --> 00:00:53,720 Speaker 1: all Americans are carrying credit card debt. The balances have 18 00:00:53,880 --> 00:00:56,600 Speaker 1: grown just ten in just in the last couple of years, 19 00:00:56,800 --> 00:01:00,800 Speaker 1: ten percent, and the rates they're paying the they've ever 20 00:01:00,880 --> 00:01:03,720 Speaker 1: been since the Federal Reserve started measuring this back in 21 00:01:03,800 --> 00:01:06,800 Speaker 1: nineteen ninety four. The average rate paid on cards is 22 00:01:06,840 --> 00:01:09,760 Speaker 1: now over twenty two percent. So just to have the 23 00:01:09,800 --> 00:01:12,959 Speaker 1: same balance they had a few years ago. Consumers their 24 00:01:13,280 --> 00:01:15,080 Speaker 1: minimum payments are going way up. 25 00:01:15,480 --> 00:01:17,640 Speaker 2: Well, it's incredible too. The notes that you've given me 26 00:01:17,720 --> 00:01:20,320 Speaker 2: is that that APR margins hit a record fourteen point 27 00:01:20,319 --> 00:01:23,440 Speaker 2: three percent in twenty twenty three, aprs on credit cards 28 00:01:23,480 --> 00:01:27,639 Speaker 2: nearly doubling to twenty two point eight percent from twelve 29 00:01:27,720 --> 00:01:32,440 Speaker 2: point nine percent and twenty thirteen. Do Americans largely know 30 00:01:33,720 --> 00:01:36,560 Speaker 2: the map here behind the higher interest rates and how 31 00:01:36,640 --> 00:01:38,800 Speaker 2: much that could burn into their pocket at the end 32 00:01:38,840 --> 00:01:41,119 Speaker 2: of the day. I'm wondering at one, at what point 33 00:01:41,680 --> 00:01:43,800 Speaker 2: there's a wake up call. 34 00:01:43,920 --> 00:01:46,560 Speaker 1: Yeah, it's a great question, and the answer is, unfortunately, no, 35 00:01:46,720 --> 00:01:49,840 Speaker 1: they don't. Half of all Americans do not know the 36 00:01:49,880 --> 00:01:51,200 Speaker 1: aprs on their cards. 37 00:01:51,400 --> 00:01:53,600 Speaker 4: That's not how they shop, right They shop for the 38 00:01:53,680 --> 00:01:56,880 Speaker 4: rewards and the affinity programs, and credit cards are a 39 00:01:56,960 --> 00:01:59,480 Speaker 4: very convenient way to pay. The problem is is if 40 00:01:59,520 --> 00:02:02,160 Speaker 4: you don't pay it off, which as I mentioned, half 41 00:02:02,160 --> 00:02:04,440 Speaker 4: of all Americans aren't, you have a loan and it's 42 00:02:04,480 --> 00:02:06,520 Speaker 4: a really, really lousy loan. 43 00:02:07,240 --> 00:02:09,480 Speaker 2: Do you really think that Americans are working up to 44 00:02:09,720 --> 00:02:12,120 Speaker 2: shore up their credit situation right now? I mean, do 45 00:02:12,160 --> 00:02:14,520 Speaker 2: you see people really paying down debt to the point 46 00:02:14,520 --> 00:02:17,520 Speaker 2: that they can get out of what often becomes a 47 00:02:17,639 --> 00:02:20,480 Speaker 2: vicious cycle of interest payments. 48 00:02:21,600 --> 00:02:23,919 Speaker 1: Yeah, we are seeing a change in consumer behavior. I 49 00:02:23,919 --> 00:02:27,120 Speaker 1: would say when inflation first hit, consumers were. 50 00:02:27,000 --> 00:02:29,520 Speaker 3: Caught off guard. We saw that and our behavior. 51 00:02:29,600 --> 00:02:32,120 Speaker 1: Right, they literally were living the same life they have 52 00:02:32,280 --> 00:02:35,400 Speaker 1: been living, but all of a sudden, everything costs more. Right, 53 00:02:35,440 --> 00:02:38,360 Speaker 1: They're paying more for groceries and they've paid in you know, 54 00:02:38,480 --> 00:02:41,160 Speaker 1: thirty years. Their rents are going up, and so it 55 00:02:41,200 --> 00:02:43,760 Speaker 1: would be the same routine of shopping at the same 56 00:02:43,800 --> 00:02:46,320 Speaker 1: store and eating out at the same restaurant, and all 57 00:02:46,400 --> 00:02:48,959 Speaker 1: of a sudden they were realizing they didn't have any 58 00:02:48,960 --> 00:02:49,959 Speaker 1: money in their account. 59 00:02:50,240 --> 00:02:52,880 Speaker 3: So we have seen people adjust their behavior. 60 00:02:53,880 --> 00:02:57,120 Speaker 1: You know, about seventy percent of Americans are reporting that 61 00:02:57,120 --> 00:02:58,760 Speaker 1: they are cutting back on their spending. 62 00:02:59,840 --> 00:03:01,720 Speaker 3: And what we're trying to get out there. 63 00:03:01,639 --> 00:03:03,520 Speaker 1: Is, you know you can you can cut back on 64 00:03:03,560 --> 00:03:06,080 Speaker 1: your spending, but if you have a credit card balance 65 00:03:06,480 --> 00:03:09,520 Speaker 1: that you are you know that you are maintaining, there. 66 00:03:09,480 --> 00:03:11,600 Speaker 3: Is a way to pay that off by. 67 00:03:11,440 --> 00:03:14,240 Speaker 1: Taking out a personal loan from lending Club. You know, 68 00:03:14,320 --> 00:03:17,600 Speaker 1: the rates that we're offering consumers are more like fourteen 69 00:03:17,720 --> 00:03:20,120 Speaker 1: percent versus twenty three percent for cards. 70 00:03:20,440 --> 00:03:22,720 Speaker 3: So We're doing our part to get the message out there. 71 00:03:22,800 --> 00:03:25,560 Speaker 1: Let people put it all into one simple monthly bill, 72 00:03:25,919 --> 00:03:27,280 Speaker 1: you know, because most Americans have. 73 00:03:27,400 --> 00:03:30,079 Speaker 3: Four or more credit cards that they're managing. 74 00:03:30,320 --> 00:03:33,000 Speaker 2: You know, there's a lot of FED data showing delinquencies 75 00:03:33,080 --> 00:03:35,840 Speaker 2: rising to pre COVID levels. Once again, what does a 76 00:03:35,880 --> 00:03:37,320 Speaker 2: picture look like moving forward? 77 00:03:37,320 --> 00:03:39,880 Speaker 3: Scott, Yeah, it's true. 78 00:03:40,120 --> 00:03:43,400 Speaker 1: We saw a really benign period post pandemic where a 79 00:03:43,400 --> 00:03:45,400 Speaker 1: lot of spending categories went away, right. 80 00:03:45,440 --> 00:03:47,480 Speaker 3: People weren't eating out, they weren't traveling. 81 00:03:48,200 --> 00:03:51,960 Speaker 1: There was government stimulus that put more money in people's accounts, and. 82 00:03:52,200 --> 00:03:54,800 Speaker 3: They actually did the right thing. They delevered, they paid 83 00:03:54,800 --> 00:03:56,040 Speaker 3: off a lot of that debt. 84 00:03:56,240 --> 00:03:59,960 Speaker 1: But when the economy opened up and people started spending again, 85 00:04:00,240 --> 00:04:03,800 Speaker 1: and some would say revenge spending and inflation kicked in, 86 00:04:04,160 --> 00:04:04,840 Speaker 1: things went. 87 00:04:04,680 --> 00:04:06,920 Speaker 3: The other way and there was a real high rate 88 00:04:06,960 --> 00:04:10,320 Speaker 3: of change in the consumer in twenty one and twenty two, 89 00:04:10,960 --> 00:04:12,720 Speaker 3: where what you really saw. 90 00:04:12,680 --> 00:04:16,120 Speaker 1: Was, as I mentioned, people getting caught off guard. And 91 00:04:16,400 --> 00:04:19,680 Speaker 1: you know, inflation affects everybody. Unemployment, which is usually a 92 00:04:19,800 --> 00:04:22,880 Speaker 1: driver of credit card delinquencies, that affects one or two 93 00:04:22,920 --> 00:04:26,560 Speaker 1: percent of the population. Inflation affects everybody. So what we've 94 00:04:26,600 --> 00:04:28,800 Speaker 1: seen is a real rate of change through twenty two. 95 00:04:28,880 --> 00:04:32,760 Speaker 1: But things are stabilizing now and they are normalizing. I 96 00:04:32,760 --> 00:04:36,600 Speaker 1: wouldn't call credit performance well. Delinquencies are up across. 97 00:04:36,279 --> 00:04:40,400 Speaker 3: All categories of credit, They're not up to alarming levels, right. 98 00:04:40,440 --> 00:04:43,800 Speaker 1: Things have stabilized at a higher level than they were 99 00:04:44,160 --> 00:04:45,400 Speaker 1: kind of coming out of COVID. 100 00:04:45,760 --> 00:04:48,280 Speaker 3: But things appear to be normalizing now. 101 00:04:48,520 --> 00:04:51,240 Speaker 2: How do you think about your own credit quality here? 102 00:04:51,279 --> 00:04:53,760 Speaker 2: You know, when people were worried about the state of 103 00:04:53,760 --> 00:04:56,600 Speaker 2: consumer into a potential recession last year, you did see 104 00:04:56,880 --> 00:04:59,320 Speaker 2: your stock at lending Club take a hit. When do 105 00:04:59,400 --> 00:05:03,600 Speaker 2: you think esters will start to get more excited about 106 00:05:03,880 --> 00:05:06,599 Speaker 2: the state of the consumer and kind of start to 107 00:05:06,640 --> 00:05:10,320 Speaker 2: shake off those risks tied to a potential recession and 108 00:05:10,360 --> 00:05:11,680 Speaker 2: what that could mean for consumer. 109 00:05:12,640 --> 00:05:14,400 Speaker 1: Yeah, you're right, there's been a lot of concern and 110 00:05:14,440 --> 00:05:18,719 Speaker 1: I think understandably about the outlook for the consumer. Right, 111 00:05:18,880 --> 00:05:22,360 Speaker 1: We've been talking about this has been the most forecast 112 00:05:22,480 --> 00:05:26,719 Speaker 1: recession that hasn't hit, and that's impacted you know, a 113 00:05:26,760 --> 00:05:31,040 Speaker 1: lot of especially consumer finance companies. You know, we just 114 00:05:31,080 --> 00:05:33,680 Speaker 1: put out in our last earnings call was we shared 115 00:05:33,760 --> 00:05:36,720 Speaker 1: our credit data going out over the last twelve quarters. 116 00:05:36,720 --> 00:05:38,200 Speaker 3: So look back over the past. 117 00:05:37,960 --> 00:05:42,320 Speaker 1: Three years showing our delinquency performance and what you can 118 00:05:42,320 --> 00:05:44,839 Speaker 1: see as one, it's stabilized in line with what I 119 00:05:44,960 --> 00:05:48,119 Speaker 1: just said, and two, our delinquencies are on average about 120 00:05:48,160 --> 00:05:50,600 Speaker 1: forty percent below the competitive set. 121 00:05:50,760 --> 00:05:53,080 Speaker 3: So we feel really good about the quality of the 122 00:05:53,120 --> 00:05:54,159 Speaker 3: credit that we're booking. 123 00:05:55,040 --> 00:05:57,680 Speaker 1: We feel really good about the opportunity in front of us, 124 00:05:57,680 --> 00:05:59,600 Speaker 1: the fact that there's one point. 125 00:05:59,360 --> 00:06:02,560 Speaker 3: Three trillion in credit card debt that is our core market. 126 00:06:02,600 --> 00:06:06,640 Speaker 3: It's the largest it's ever been, and the spread between 127 00:06:06,680 --> 00:06:07,400 Speaker 3: the rates. 128 00:06:07,120 --> 00:06:09,360 Speaker 1: That the cards are charging and what we offer has 129 00:06:09,400 --> 00:06:12,400 Speaker 1: never been larger. So I think, you know, at this point, 130 00:06:12,480 --> 00:06:16,680 Speaker 1: as the consensus for a soft landing becomes a little higher, 131 00:06:16,760 --> 00:06:18,880 Speaker 1: and you know, the state of. 132 00:06:18,800 --> 00:06:21,800 Speaker 3: The consumer becomes more clear, we're excited to go after that. 133 00:06:22,760 --> 00:06:25,160 Speaker 2: Lending glob CEO, Scott Sanborn, we thank you so much 134 00:06:25,160 --> 00:06:25,840 Speaker 2: for joining us.