Access to Credit Builds Consumer Confidence

tight-moneyFast on the heels of the release of the CFPB’s Proposed Rule, which could effectively shut down the small dollar lending market, comes the news that consumers’ spending expectations dropped, after an upswing in September. Perhaps not surprisingly, there was also a decline in consumers’ outlook on credit availability in the year ahead, according to the Federal Reserve Bank of New York.

The New York Fed’s Survey of Consumer Expectations is a monthly, internet-based survey of approximately 1,200 household heads. It contains insight about how consumers expect overall inflation and prices for food, gas, housing, education and medical care to change over time. It also provides Americans’ views about job prospects and earnings growth, as well as their expectations about future spending and access to credit.

Access to credit is a practical necessity in today’s economy. Many consumers increasingly need credit, not for frivolous purchases, but to cover basic, everyday needs. The CFPB’s paternalistic attitude toward “protecting” consumers from the encumbrance of small dollar loans misses one very important point: denying access to credit does not make the need for credit go away. Removing a legitimate, albeit expensive, source of credit will just force consumers in great need to look elsewhere – possibly driving them into the arms of less scrupulous lenders.

The Survey of Consumer Expectations is one of the methods used to measure consumer confidence. Access to credit is a very basic factor in building consumer confidence, and should be available to all socio-economic groups.

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