Regulators have raised red flags about weakening credit standards in the auto loan business, but Capital One Financial Chief Executive Officer Richard Fairbank says those worries are overblown.
"I probably am a little bit less concerned about the auto business, and the auto industry, than some folks are," Fairbank said Monday at the Barclays Financial Services Conference in New York.
He acknowledged that increased competition among lenders is leading to looser loan terms, but said the industry is still normalizing after an extraordinary recession-era period in which numerous lenders left the market.
"What we are seeing now is a very natural regression toward the mean. I wouldn't really call it alarming degradation," Fairbank said.
"So the auto business overall is still in a pretty good place," he added. "But there's no doubt its direction is going toward the mean, and could easily crash through that and get on the other side."
Capital One, of McLean, Va., originated $5.4 billion of auto loans in the second quarter, 19% more than the same period a year earlier.
The Office of the Comptroller of the Currency has been warning about loosening credit standards, including longer loan terms and higher loan-to-value ratios, in the auto lending industry.
Fairbank acknowledged Monday that auto loans are carrying longer terms, but overall he said that underwriting practices are still quite strong.
He said that he's more concerned about commercial and industrial lending, arguing that the solid performance of business loans during the recession has led to increased competition among banks.