Major banks in America are tightening access to credit as coronavirus shutdowns put households across America in dire financial shape, The Wall Street Journal reported Saturday.
“Banks and financial-technology firms are starting to toughen their approval standards for new loans to consumers and small businesses. That means many people could find it hard to get credit just when they most need it, as the novel coronavirus pandemic puts thousands out of work,” the newspaper reported.
“Large U.S. lenders including JPMorgan Chase & Co., Bank of America Corp., Capital One Financial Corp. and Santander Consumer USA Holdings Inc. are among the companies reviewing and revising certain lending criteria, according to people familiar with the matter,” The Journal reported. “Planned moves include approving fewer consumers with lower credit scores, asking for more income documentation and placing lower spending limits on new credit cards.”
Over three million Americans filed have filled for unemployment since the shutdowns began.
“American Express Co. has scaled back financing offers to small businesses, according to people familiar with the matter. Fintech lenders Square Inc. and On Deck Capital Inc. said this week they would do the same,” the newspaper noted. “Lenders are concerned that rising unemployment and a potential recession will send loan defaults soaring. The moves suggest at best a pause and at worst an end to six-plus years of a bull run in credit, where financial firms have been eager to lend and underwriting standards for credit cards, auto loans and personal loans have been relatively loose.”