The outlook in consumer finance is bleak, Moody's Investors Service said in a report Tuesday, as the economy has likely slipped into recession and lenders struggle with bad credit.
Consumer finance companies _ credit-card lenders, auto lenders and student lenders _ likely face a "relatively mild recession" the first half of this year, Moody's said.
Lenders also face the risk the economy may suffer more severely than expected, Moody's said. A recovery depends on the stabilization of financial markets, a rebound in housing and the direction of energy prices, Moody's said.
Credit card lenders' loans are being repaid less reliably, Moody's said, and profits are being squeezed as companies have to set aside money to cover bad debt.
Auto lenders have also been stung by accelerating defaults. Further, lenders are not recovering as much when they repossess cars from delinquent borrowers because of softer prices for auctioned cars.
Finally, student lenders have been squeezed by legislation last year cutting subsidies to student lenders and forcing them to shoulder a greater share of the risk of students defaulting.
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