Big banks tighten purse strings as consumer lenders come under scrutiny

New York

CONSUMER lending firms that focus on borrowers with weak credit have done surprisingly well in the last few years. Many survived the financial crisis of 2008, the Great Recession, and even went on to post strong profits in the face of an onslaught of new regulations. Now, though, these lenders face pressure from an unlikely source: the big Wall Street banks that have long provided the financial underpinnings for their operations.

The large banks lend money to the consumer finance firms, which use it to make high-interest loans to individuals. But recently, some banks have begun tightening the terms of the financing in a way that could have far-reaching implications for the consumer finance industry.