C3 Index Sees Tough Times
Business conditions for consumer lenders fell to their lowest point on record in the third quarter of 2026, according to the American Financial Services Association’s latest Consumer Credit Conditions (C3) Index. Rising funding costs and growing strain among subprime borrowers drove the decline, and lenders expect the pressure to continue over the next six months.
38 senior executives from AFSA Member Companies were surveyed between late September and mid-October 2026. You can read the full analysis here.
The Net Improving Index (NII) for overall business conditions fell to -39.5 from -5.3 in the second quarter, the lowest reading since AFSA launched the survey. Nearly half of lenders (47.4 percent) said conditions worsened during the quarter. Fewer than one in 12 (7.9 percent) said they improved.
Funding costs posted the weakest result in the survey. The NII fell to -60.5 from -33.3, as more than 63 percent of lenders reported higher costs and only 2.6 percent reported relief. The Federal Reserve raised its benchmark rate in September for the first time since 2023, and the 10-year Treasury yield reached its highest level since 2007.
Lenders also reported clear signs of household financial stress. The NII for performance of outstanding loans fell to -29.7 from -18.4, and the NII for subprime loan performance dropped to -51.7 from -41.4, a new survey low. Nearly 59 percent of lenders that serve subprime borrowers said performance worsened.
Loan demand reversed after a strong second quarter. The NII for overall demand fell to -15.8 from +26.3, and subprime demand fell to -6.9 from +26.7.
Lenders’ six-month outlook reinforces this view: the NII for expected business conditions measured -28.9, also a survey low, with half of respondents expecting conditions to worsen. Lenders expect funding costs to deteriorate further (NII of -63.2, down from -25.0 last quarter). Expected demand for subprime credit held flat at 0.0, a sign that households on tight budgets will continue to need access to credit even as the broader market cools.
Personal installment lenders reported a tough quarter, with negative readings on all six current-condition measures and an overall conditions NII of -55.6. Vehicle finance lenders reported the sharpest rise in funding costs (NII of -69.2), though subprime auto demand stayed modestly positive at +5.6.
November 5th, 2026
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