U.S. Online Lenders Are Now Preparing For A Recession

Tuesday, April 16, 2019
By Paul Martin

by Tyler Durden
ZeroHedge.com
Tue, 04/16/2019

Almost ten years after the Great Recession ended, online lenders in the U.S. including LendingClub, Kabbage, and Avant are preparing for an economic slowdown by reviewing their risk exposure, reported Reuters.

The U.S. economy stalled in the last six months, as the threat of a recession surged in March with the 3 month-10 year spread inverting for the first time since 2007.

A slowing economy will amplify credit losses, liquidity crunches, and higher funding costs could strain some digital lenders if not adequately prepared.

“This is very top of mind for us,” LendingClub Chief Executive Officer Scott Sanborn told Reuters in referencing the possibility of a recession. “It’s not a question of ‘if,’ it’s ‘when,’ and it’s not five years away.”

Sanborn and executives at several other online lender shops who spoke with Reuters said economic indicators continue to deteriorate.

Economists polled by Reuters last month saw a 25% chance of a U.S. recession over the next 12 months. More recently, the IMF warned about a synchronized global downturn, indicating that the world is now in a “significantly weakened global expansion.”

“We were seeing economists bringing up some warning signs, and we were following the Fed signals and that they were becoming more dovish,” said Bhanu Arora, the head of consumer lending at the Chicago-based lender Avant. “We wanted to be prepared and ready.”

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