Chris Stinebert is president and chief executive officer of the American Financial Services Association (AFSA), a national trade association for the consumer credit industry. AFSA’s 375 members include consumer and commercial finance companies and banks involved in auto finance and leasing, mortgage loans, personal loans, payment cards, industrial banks and industry suppliers. AFSA’s activities include government affairs and advocacy, financial literacy, and professional development.
Stinebert has more than 30 years experience in managing national trade associations with key highlights in government affairs and advocacy, strategic planning and implementation, technical standards and regulations, and economic and statistical data collection. He currently serves as chairman of Americans Well-informed on Automobile Retailing Economics (AWARE), whose mission is to educate consumers on vehicle financing. He also serves on the U.S. Chamber of Commerce’s Committee of 100, which comprises 100 CEOs of leading trade associations, and the Key Industry Association Committee of the American Society of Association Executives (ASAE).
Stinebert graciously agreed to spend a few minutes with The Score amid preparation for the 98th AFSA Annual Meeting in Los Angeles.
What are you hearing from AFSA members in terms of the economic recovery and lending opportunities for 2015? Are lending volumes on the rise? What about consumer inclination toward borrowing?
AFSA members are confident in the American economy both at the consumer and business levels. According to recent data from the Federal Reserve, lending volumes are on the rise – overall borrowing rose $13.5 billion in August, pushing total consumer debt to a record level of $3.25 trillion.
In addition, U.S. consumer confidence hit a 14-month high in September, spurred by strong employment growth. Americans seem to be making purchases that they put off during the recession.
The diverse AFSA membership issues a wide range of loan types, including auto loans, mortgages, personal installment loans and payment cards. Are consumer appetite and suitability for all loan types rebounding at the same rate? Are volumes surging or lagging among certain loan types more than others? What does this tell you about the state of the recovery?
Auto sales continue to lead the economic recovery. Many analysts are predicting new car sales to approach 16 million units this year and continue to be robust in 2015. Americans are purchasing both new and used vehicles at record rates as they replace a fleet that on average is more than 11 years old.
Again, the Federal Reserve report shows that some types of consumer credit are surging while others are slower to recover. It’s important to note that virtually all types of credit that AFSA members offer are steadily growing, except mortgage. Home sales and mortgage financing continue to be a drag on the economic recovery. However, with the exception of the housing market, the overall recovery continues to progress and consumers have access to affordable credit.
AFSA vocally defended auto-lending practices over the summer, in response to a New York Times article and editorial that alleged predatory practices and the threat of a market collapse around auto loans to consumers who can’t afford them. Even if this is only a problem of perception, should auto lenders be doing more to explain their policies and practices?
AFSA recognizes that some bad actors use illegal predatory practices and that they should be held accountable for breaking the law.
The allegations of a bubble in subprime auto were overblown, as AFSA demonstrated with a wealth of data that showed the cyclical nature of the vehicle finance market. Economists and analysts from Moody’s Analytics, Equifax, Experian, and the Federal Reserve Bank of New York, among others, dispelled the notion of a pending problem with historical data.
While AFSA and others painted an accurate picture of the vehicle finance marketplace, the misperception of a subprime auto bubble remains for some. Recognizing this problem, AFSA believes that vehicle finance companies should be open and transparent with their policies and procedures. In addition, AFSA’s members have instituted compliance management programs and are using AFSA University to train their employees on key federal financial services laws and regulations.
The Consumer Financial Protection Bureau (CFPB) and its oversight of lenders is the focus of the closing luncheon keynote at this year’s AFSA Annual Meeting. What’s your sense of the CFPB’s impact on the consumer credit industry?
The CFPB and its oversight will be a topic of hot conversation at our Annual Meeting.
The CFPB has done some good things for consumers, but AFSA remains concerned about potential unintended consequences. AFSA members are concerned that access to affordable credit could be restricted by the bureau’s overlapping and often-contradictory regulatory actions.
We’ve been heartened by the Bureau’s invitation to work with them on important issues affecting consumers and lenders. Still, the Bureau relies too heavily on rules by enforcement – which makes it difficult for lenders to clearly know the rules of the road.
The under-35 generation, known as the millennials, has growing economic power and a reputation for distrusting financial institutions and shunning credit. What are AFSA and its members doing to better understand and attract this demographic?
Historically, ASFA’s members have extended credit through personal contact with their consumers. This face-to-face interaction has been essential to their success. Now, they must learn how to work with a consumer who prefers to interact through the Internet for information, marketing and product delivery. Millennials offer a unique challenge to the lending community and how we must adapt to this new paradigm.
Individual member companies are meeting this challenge head-on – some are more progressive in their approach while others are more cautious about overhauling their time-tested processes. A few years ago, AFSA’s Vehicle Finance Conference featured a competition where two teams of graduate students presented marketing strategies designed to reach millennials. Other conference sessions in recent years addressed how to attract and retain Generation Y employees and the characteristics and car-buying habits of Millennials.
The question is a very timely one – I think this really underscores the absolute necessity that exists for consumer education. The best way for consumers and millennials to ensure they are getting quality products is to educate themselves on the products offered. AFSA’s Education Foundation offers a wealth of educational materials for free to consumers on topics such as vehicle financing and small-dollar credit.