Ally Financial is reportedly cutting staff, ending mortgage originations and rethinking its credit card business.
The company will lay off less than 5% of its workforce, Bloomberg News reported Wednesday (Jan. 8), citing a statement from an Ally spokesperson.
“As we continue to right-size our company, we made the difficult decision to selectively reduce our workforce in some areas, while continuing to hire in our other areas of our business,” spokesperson Peter Gilchrist said in the email.
Gilchrist said the cuts aren’t confined to one area of the business or location, with mortgage originations scheduled to end during this quarter.
The report said Ally has reported worsening credit challenges throughout the company, including in its auto-lending unit, as higher interest has made the cost of debt more expensive for American consumers.
Ally saw its shares plunge by double digits in September, with executives saying the pressures facing its borrowers were leading to delinquencies and increasing charge-offs across its loans.
“Our borrower is struggling with high inflation and cost of living, and now more recently, a weakening employment picture,” Chief Financial Officer Russell Hutchinson said at a financial conference at the time.
And during an earnings call in October, CEO Michael Rhodes warned that the company’s next few quarters would be “choppy.”
The lender said it had imposed tougher standards for borrowers by instituting stricter verification requirements for proving income and employment.
“Our origination trends reflect a deliberate strategy to be increasingly selective in our underwriting with a focus on prioritizing risk-adjusted returns over origination volume,” Rhodes told analysts. “We have moved up significantly in terms of borrower credit quality since early 2023, which will be a tailwind to delinquency and frequency over time.”
Federal Reserve data from last month showed Americans’ credit card debt still climbing, from $5.093 trillion in September to $5.113 trillion in October. Consumer credit on a seasonably adjusted basis increased at a 4.5% annual rate for October, up from 0.8% the month before.
And data in November from the The Credit Access Survey released by the Federal Reserve Bank of New York showed that consumers were having greater trouble accessing credit for things like auto loans and mortgages.
“Reported rejection rates for credit cards, mortgages, auto loans, credit card limit extension applications and mortgage loan refinance applications all rose in 2024,” the New York Fed said in a press release that accompanied the data.
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