Deloitte Center for Financial Services 1
Deloitte’s Consumer Lending Survey
We have entered a new phase in the evolution of U.S.retail banking. As banks face unprecedentedpressures from a combination of tough economicconditions and pervasive regulatory reforms, will wesee the emergence of a new paradigm for consumerlending?To determine the scale of the challenge facing thebanks and to find out how consumers have beenreacting to these developments, the Center forFinancial Services sponsored a survey conducted byHarris Interactive between August 12, 2010, toAugust 30, 2010, to obtain a national sample of U.S.retail banking customers. According to our survey of5,142 respondents, many consumers are still dealingwith the aftermath of the financial crisis and recessionof 2007 - 2009. The Center for Financial Services willfurther investigate this consumer lending paradigmamong three dimensions: first-time defaulters, crossselling, and customer satisfaction.
The emerging “first
time defaulter” market segment
We see a new segment emerging as a result of the financial crisis. We call this group of
consumers the “
― individuals who have gone through at least one
serious negative credit event in the last two years
for the first time
in their lives.
According to Deloitte’s survey, 22% of Americans with bank accounts experienced a
serious negative credit situation during the last two years. For fully 11%, this was anew experience
the first time in their lives they fell into delinquency.
Unemployment and reduced income were the principal reasons why theseindividuals have failed to meet their credit obligations.
Many first-time defaulters rated their interactions with lenders during their negative
credit event as “poor.” This dissatisfaction may strongly encourage them to look
elsewhere when borrowing in the future.
If not for the economic recession, which has affected millions of households inAmerica, many of the first-time defaulters might have remained in good credit standing.
The care and attention shown to these first-time defaulters now
and when they are on the path to becoming creditworthy customersagain
may well determine who they do business with in the future. Lenders could benefit from having more effective ways to identifyand differentiate the temporarily credit-impaired from those more seriously affected for the long term.
* Total exceeds 100% as respondents could pick more than one response.
2%6%8%9%12%13%14%14%29%43%58%Been delinquent on child support paymentsForeclosureCharge-offs, meaning bank has forgiven all or
Legal judgmentsThree or more times when you were more than
BankruptcyBeen delinquent on taxesThree or more times when you were more than
Three or more times when you were more than
Been delinquent on medical billsContacted by collection agency
Exhibit 2: Negative credit experience during the last two years (first-time defaulters) *
How Do We Define a First-TimeDefaulter?
First-time defaulters are those who, forthe first time, have had a negative creditexperience such as delinquency,foreclosure, bankruptcy and/or charge-offs, among others, in the last twoyears, since the peak of the economiccrisis is September 2008. (To becategorized as first-time defaulters, theywould have had to experience at leastone of the 11 events listed in Exhibit 2.)11%10%12%66%
Exhibit 1: Credit experience segments
First-time defaulters -Those whoexperienced a negative credit event in thelast two years for the first time-11%Those who have experienced a negativecredit event more than two years ago andalso during the last two years-10%Those who have experienced a negativecredit event more than two years ago butnot during the last two years-12%Those who have never had a negativecredit event in their past-66%Figures may not add due to rounding