How U.S. Lenders Are Adapting to 2026’s New Risk Reality

As the economic landscape shifts heading deeper into 2026, lenders are navigating a more complex and uneven risk environment defined by widening financial divides, rising delinquencies, regulatory uncertainty and evolving borrower behavior.

In this episode, host Zach Tondre, Director of Market Planning at LexisNexis Risk Solutions, is joined by Carrie Coker, Senior Director of Market Planning for Servicing and Recovery and Amy Crawford, Senior Director of Market Planning for Business Risk Management, to explore how U.S. lenders and servicers are adapting to today’s new risk reality.

Together, they unpack the key credit risk trends shaping 2026, including:

• How a K‑shaped economy is driving credit demand rooted in necessity rather than growth
• Why rising delinquencies are making proactive portfolio monitoring and early intervention more critical
• The downstream servicing and recovery impacts of increased credit card, BNPL and short‑term loan usage
• How tariff volatility and margin pressure are affecting certain small business sectors more than others
• The growing complexity introduced by policy changes around student loans and medical debt
• Why alternative data has moved from “nice to have” to essential across origination, servicing and small business lending

Learn how lenders can sharpen visibility, adapt strategies and make more confident credit decisions in a rapidly changing environment.

DISCLAIMER: The information provided in this podcast is for informational purposes only and is not intended to and shall not be used as legal advice.  The views and opinions expressed in this podcast are solely those of the speakers and do not necessarily reflect the views or positions of LexisNexis Risk Solutions. LexisNexis Risk Solutions does not warrant that the information provided in this podcast is accurate or error-free.

LexisNexis and the Knowledge Burst logo are registered trademarks of RELX Inc. Other products and services may be trademarks or registered trademarks of their respective companies. Copyright© 2026 LexisNexis Risk Solutions.

Transcript

Welcome And Guest Introductions

SPEAKER_00 0:00

Welcome back everyone to Credit in Focus. I'm Zach Tondre, Director of Market Planning at Lexus Nexus Risk Solutions, where I focus on credit risk specifically at the application stage. And joining me today, I have my colleagues Carrie Coker, Senior Director of Market Planning for Servicing and Recovery, and Amy Crawford, Senior Director of Market Planning for Business Risk Management. Welcome everyone. And why don't you both take a minute just to introduce yourselves? Carrie, start off with you.

SPEAKER_01 0:24

Hi, Zach, and thanks. Yeah, I'm Carrie Coker. I'm the senior director of market planning for servicing and recovery. We cover everything in the post-origination ecosystem. So servicing of a portfolio, account management, all the way through early stage delinquency, traditional collection activity, and the post-recovery, if you will, repossession. We also have some submarkets for private investigators and process servers. I've been with Lexus since 2019. Very exciting. And prior to that, I was the head of consumer data strategy for Midland Credit Management, one of the larger debt buyers here in the US. And prior to that, I was with a mortgage reseller under the name of First American, later Core Logic, Credco. I was 17 years there managing the Credit Bureau Relationships.

SPEAKER_02 1:14

Amy? Awesome. Hi, Carrie. Hi, Zach. My name's Amy Crawford, Senior Director of Market Planning for Business Risk Management. So that involves everything from business identity verification, business risk management and mitigation, portfolio management, and uh business credit. I've been with Lexus for uh 15 years, almost reaching my 16th year now. And prior to working in business risk management, I worked on the government side of LexusNexis doing a variety of things. Zach, back over to you.

The Split Economy And Credit Use

Payment Priorities Shift In Servicing

SPEAKER_00 1:42

Great. Thank you both. Today we're going to be exploring how shifting economic conditions, consumer behavior, and regulatory changes are reshaping how U.S. lenders and servicers evaluate risk in 2026. And we're seeing this widening gap financially between stable households and those experiencing distress. And that's creating some differing borrowing behaviors across these consumer segments. As you can imagine, that creates some difficulties for lenders. And at the same time, we're seeing some operational pressures that are rising on the small business side of things, as well as rising debt. All of this is influencing how consumers and small businesses are seeking and using credit and other financial services. Financial institutions will really need to kind of sharpen their visibility into both the emerging risk and the opportunities created by these unique market conditions. And those that embrace broader alternative data sources and more adaptive assessment strategies will be better positioned to more confidently grow their portfolios. So, with that as kind of a background, let's just jump into some of the credit risk trends for this year. The first trend that we're going to be talking about is a split economy. And just talking about how this split economy will be driving more credit-seeking behavior as we are in the midst of a persistently widening K-shaped economy where consumer distress is not distributed evenly across the population. We've kind of had these emerging segments that are kind of experiencing differing levels of distress, which complicates things. Financial hardship is increasingly concentrated among lower-income households and younger adults. This is pushing that segment towards greater credit utilization. And this utilization really is kind of across the board: credit card, BNPL products, short-term kind of high-rate lending products, whether those be payday or online loans. Furthermore, we're seeing one in three Americans that are now using credit cards for their day-to-day expenses. Younger consumers have the highest rate of credit card and BNPL use. And additionally, six in 10 Gen Z consumers use credit cards and BNPL for essential purchases. Kind of with that, with that background, throwing it over to Carrie, you know, how are you seeing credit being used and how does this show up later in kind of the world of servicing?

Small Business Stress In A Split Economy

SPEAKER_01 3:59

It's a timely question, Zach. In times of economic stress, uh, you know, many consumers by necessity reach for expanded credit options. Sometimes this is referred to as a sort of cash flow bridge for day-to-day needs as opposed to discretionary lifestyle choices that more financially stable consumers may have leveraged. Based on experiences from previous recession eras, this type of consumer financial behavior can absolutely impact servicing strategies. When a consumer is using credit access as a cash flow bridge, it will change how that consumer might consider their payment priorities, or as it's sometimes referred to, payment hierarchies. For example, historically, consumers have prioritized things like mortgage payments or rent and auto loans as a top payment priority, while credit cards fell to the wayside. You might want to be able to put up with collection calls for a delinquent credit card, but evicted from your home or having your car um repossessed, right? You won't be able to get to work, right? That is a different kind of impact. However, when we think about you reference buy now, pay later, when we think about the rise of that buy now, pay later and the consumption levels of those products by younger demographics, we have seen Gen Z consumers prioritize their buy now pay later installments before their credit card minimums. They appear to be doing this in order to preserve the access to the buy now type of accessibility for next week's groceries, for example. That necessity of having that access to credit is becoming more critical in different demographics. Other impacts could include those areas around what payment reporting data is available to the consumer data ecosystem. By example, buy now pay letter is not holistically reported to all of the traditional credit bureaus. So without that robust visibility to the full financial obligations of consumers, servicers are finding that they have blind spots with that type of sometimes called phantom debt, right? Servicers may also find that previously assumed cure rate models are no longer applicable. So historically, if we look back in time, right, a consumer that falls behind, they might be assumed to cure their debt by cutting back on luxuries like dining out or travel. But if the credit access and debt is being used for things like rent, utilities, groceries, there are no luxuries to cut. One of our consultants recently worked with a collection agency who shared that the tactic of having, you know, budget talks, budget talk tracks, right? Talk-offs with the consumers, they're less effective these days because of this shifting behavior and that growing economic strain that we're seeing. This leads to a higher possibility of defaults and ultimately charge-offs rather than those peer rates. Amy, how does a split economy affect small businesses?

SPEAKER_02 6:47

It's interesting, Carrie. You know, for small businesses, it shows up in three different ways: demand volatility, higher reliance on credit, and compressed margins. And as both of you know, some consumer segments will continue to spend normally, but others might sharply reduce their discretionary purchases. So the small businesses that are on that, the front lines, right? Like restaurants, like retail and repairs, they'll see and experience unpredictable cash flow along with swings in demand. And in terms of credit, a split economy can push SMBs more heavily into working capital lines and merchant financing to manage some of the gaps that arise when consumers move into a slower payment behavior. And lastly, and I know we're gonna touch on this a little bit later, but the impact and the unpredictability of tariffs, right? And I mean that in a completely apolitical way. Um, the impact and unpredictability of tariffs and supply costs are gonna push SMBs into margin compression. And I believe in some segments they already have. So they can pass on some of the additional costs to customers, but in order to stay competitive, they have to absorb some of it as well. So I'd say essentially a split economy creates credit demand that's driven by necessity rather than growth in the SMB space. And that changes the risk profile of many small business borrowers.

Delinquency Rising And Proactive Monitoring

SPEAKER_00 8:05

Really interesting insights from both of you. It's uh seems like as as times change, as consumer pressure and and pressure on small business changes, obviously there's just adaptations that that lenders need to be taking to kind of to kind of meet the risk as it as it evolves and changes. So great thanks for the insights on that first trend. Um we'll kind of move into the into the second trend now, and this is really just talking about rising delinquency and the importance of portfolio monitoring. It's just just the uh the critical nature of portfolio monitoring. And so, you know, when we're thinking about kind of teeing this one up, uh, you know, obviously signals of financial distress are increasing. We talked about this, and lenders are seeing this emerge in their portfolios post-origination. We did a survey with Datos uh earlier this year, and in the last 12 months, 94% of lenders were predicting that delinquencies would hold steady or rise due to persistent inflation, increasing and the increasing cost of living. Pretty, pretty obvious, obvious indicators here. Carrie, when we're when we're thinking about collection strategies, why do reactive collection strategies no longer work? Um, and why is it just essential to kind of have proactive monitoring and early default prevention tactics in place?

SPEAKER_01 9:19

So reactive strategies for collection, which is where a lender might wait for the first missed payment to take action, we are seeing that kind of increasingly failing. With those 94% of lenders expecting delinquencies to rise or stay flat, the industry is really reaching a new inflection point where waiting for a first day of delinquency is waiting too long. Again, you know, looking back on those historic recession periods and specifically in K-shaped economies, the crash, if you will, it can happen long before the first payment is missed. By the time a consumer defaults, they often have exhausted any available liquidity. This is really especially true when consumers use debt for essentials, like we mentioned, like groceries and utilities. At that point, there is usually not a lot of fat to trim, so to speak, right? In 2024, a consumer may have skipped a vacation to pay a credit card debt, but in 2026, they are choosing between paying the card and keeping the lights on. So reactive collections cannot negotiate a payment out of zero-sum budgets, right? This is why proactive monitoring for servicers is critical. It moves the strategy from recovery to default prevention. In 2026, the goal is really to intervene when a consumer is stressed but not yet broken, so to speak. Monitoring for signals and signs of financial distress where a consumer may be a current pair for the lender today, but might be experiencing delinquents or even judgments for other loans is critical. Lexus Nexus Risk Solutions has extensive intelligence for judgment and liens, and we can assist in proactively monitoring portfolios with our accurate trigger solution. In addition, consumers can become more transitory in times of economic strain. We saw this a lot during the last Great Recession. They may get a new phone number to avoid those collection calls for outstanding debt and not inform their creditors where they're still current, for example, but they've changed their phone number to avoid collection calls from other types of debt. They may move and simply not tell their creditors. They may establish new email addresses to use and avoid accessing that previously provided email. And that even means sometimes missing proactive outreach. So we're we're seeing and we're advocating for optimal best practices, really including proactive monitoring strategies for all aspects of the portfolio, really enabling creditors to reach out with options prior to default or charge off. Because, you know, remember, it's always easier to cure a consumer or offer a more positive kind of modification experience to a consumer who is a customer, after all, and keep them in brand for when they eventually recover financially rather than really incur all of that expense of default and recovery attempts and frankly a negative consumer experience. And, you know, one last comment on this topic with the current economic trends that we're seeing, proactive compliance monitoring is also incredibly important. Bankruptcies are on a rise, right? And they're rising pretty quickly here. And once a consumer files, all collection activity must cease. You do not want to risk a violation of a bankruptcy stay. So our Lexus Access Resolutions Banco product provides peace of mind and extensive event monitoring triggers to ensure that portfolio compliance is maintained. Another proactive servicing check might be active military status. Given the current headlines, for example, right? That is a process all servicers and collection entities should have in place. So, you know, Amy, let's kick it back over to you. Is portfolio stress showing up earlier or later for small businesses compared to consumer portfolios?

SPEAKER_02 12:56

You know what? I'll answer that in just a second. I'm taking some notes, Carrie, because I always learn so much from you. Skip vacations to pay credit card debt. Who'd have thought? Okay, wait, and cut out travel and dining out to save my thank you. These are wonderful. And then, of course, establish new email address. Thank you. This seems like a handbook for uh 2026 success for Amy. So I'm sorry, you were asking, uh, is portfolio stress showing up earlier or later for small businesses compared to consumer? Now that's uh that's an interesting question. Uh stress tends to show up later in traditional credit indicators for SMBs, but earlier in operational signals. And because we tend to see small business owners injecting their personal funds or taking out additional loans to avoid missing payments, traditional credit signals lag. But early stress indicators like changes in shipping volume, declining revenue or transaction activity, or inventory patterns can help identify potential deterioration months months earlier, which is why alternative data I think can be very valuable.

Tariff Volatility And SMB Credit Demand

SPEAKER_00 13:56

Fantastic. Thanks, thanks, Amy and Carrie. Um, you know, I think just all again, you know, talking about areas where where more data, more signals, and having all these signals earlier just become so valuable and critical. So moving on to trend number three, talking a little bit about tariffs uh and specifically how this tariff volatility has been hitting certain small business sectors harder. What we're seeing here, you know, with the with the tariff change is that they're unevenly impacting industries. Obviously, there are certain industries that are impacted, certain industries that aren't, and the credit demand that is driven by cost absorption, not optimism. Amy, can you walk us through which sectors are kind of feeling the most impact and what this means for the uh lenders that are that are lending to those small businesses?

SPEAKER_02 14:45

Oh, you bet, Zach. When we look at tariffs, the impact is definitely not evenly distributed across the small business economy. It's felt most by businesses in transportation, in warehousing, wholesale trade, and and I would say also construction to a lesser extent. Businesses in these industries increased borrowing to stockpile ahead of tariff increases, which drove higher balances and a spike in credit inquiries. And that's an important signal for lenders because demand for credit isn't always about expansion. It can also reflect working capital pressure from higher input costs. And now, uh, as of the recording of this uh uh podcast here in March 2026, we're seeing another layer of uncertainty with this recent announcement that the U.S. Customs and Border Protection is readying a system that'll potentially process the nearly$166 billion in what the Supreme Court recently said were illegal tariffs collected from over 300,000 importers. And I'm interested personally to see what happens next. For any small business operating on thin margins, even a temporary delay in refunds can tighten cash flow. And that uncertainty is exactly what lenders should monitor, because tariffs often create second-order credit risk effects, not just higher costs, but margin compression, working capital strain, and inventory financing pressure. The takeaway here for lenders is that the data shows tariff risk shows up first in credit behavior, like more credit inquiries and rising balances. And again, that's why that real-time visibility into SMB credit signals and alternative data is so important now more than ever, really.

Student Loans And Medical Debt Rules

SPEAKER_00 16:25

Interesting. Thanks, thanks, Amy, for that. I think that we've all been, you know, as consumers feeling the impact of those tariffs. Great to gain some clarity into how that's affecting small business and what that means for those lending into that space. For trend number four, jumping into policy changes and just talking, you know, about how that adds complexity to the consumer lending world. We all know that keeping up with changing regulations and policies complicates everything around our strategies and how we lend into these spaces. And so just thinking really about how federal and regulatory developments are expected to shift borrowed behavior this year. Carrie, what can you tell us about what's going on with the student loan payments and medical debt?

SPEAKER_01 17:06

Oh, Zach, there is so much information on these topics. And, you know, frankly, headlines can change pretty rapidly. So I'm gonna note that today is March 9th, 2026, that we're recording this because headlines could change even, you know, this afternoon or tomorrow. But, you know, in 2026, specific to student loans and medical debt, we are witnessing really a systemic overhaul of how Americans interact with some of their most, let's call it sticky debts, right? These these two categories of debt are sticky. They're a different kind of debt. Let's talk about student loans. Um, one of the most significant shifts is the legislative pivot from the quote, save plan to the repayment assistance plan or called RAP now, which was established by the one big beautiful bill act, OBBA, I believe, signed by Trump on July 4th, 2025. So as of July 1st, 2026, RAP will become the primary income-driven repayment or IDR option. For current borrowers, they're having to navigate new application processes and assessment levels, leading to some spiked monthly obligations compared to what the old SAVE plan offered. So, in addition with the various on-ramp protections now fully expired, we're now seeing a record 25% delinquency rate for federal student loans. I saw one report that said that the federal student loan default levels are now three times higher than ever recorded. And federal student loan delinquency is now being reported on credit reports, with an average delinquent borrower seeing a 57-point drop. Some reports have that at a higher point drop. In addition, you know, we've had a bit of back and forth as to when involuntary collection efforts on the federal student loan portfolio will resume right before the new year. The Trump administration announced that it would resume in January. And then in mid-January, the same administration announced a new pause until RAP can be fully rolled out. So some industry experts expect involuntary collections won't resume until sometime post-election cycle, post-midterms. What we do know for sure though is that when involuntary collection of federal student loans does resume, the tools for federal debt collection include administrative wage garnishment and tax offset. With overall delinquencies at these record high levels, the resumption of that involuntary collection for this portfolio will be impactful across all demographics and across all loan products, frankly. So we've talked about proactive monitoring, and I just really can't stress that enough. That's a really good example with what's happening with that student loan portfolio. Now you also asked about medical debt. It's another story of regulatory, let's call it tug-a war. You know, from a federal perspective, in late 2025, the federal courts vacated the CFPB's rule that would have banned medical debt from credit reports. So at a federal level, now that that's been, you know, vacated, the medical debt is still reportable on credit reports and it can generally be used in lending decisions. However, states have really taken up this topic with their own bans. I believe there's more than 15, don't quote me on that, 15 different states that now have some kind of medical debt prohibitions in place. And this really creates a patchwork of requirements for credit worthiness. A borrower in New Jersey might have a 720 score because of their$5,000 surgery. That's not reported, while a borrower in Texas with that identical uh profile has a 660. So it makes it really tough to navigate state compliance.

SPEAKER_02 20:43

Gosh, and Carrie, if if my memory serves, I believe that there was a riveting podcast that was just released, the Credit in Focus podcast, with these two wonderful speakers. And I think the discussion was credit, risk, the SMB economy, and collections, right? I think you're right, Amy. I think so too. I I think that was uh was that you, Carrie?

SPEAKER_01 21:05

That was a good, that was a great podcast. I think it was a really wonderful podcast.

Alternative Data Becomes Essential

SPEAKER_00 21:09

Well, thanks, thanks so much, Carrie. I think that, you know, as as we've experienced keeping up with some of the uh the changes in in regulations and some of the back and forth and push-pull of of where things have landed has been has been quite the quite the job lately. And so appreciate you kind of recapping all of that for us. Uh and you know, as we kind of are rounding it out today, we'll talk about our final trend. And this is really just a trend that kind of ties kind of the uh so what up to everything else that we've talked about. And uh this trend is just around how alternative data is becoming essential, not optional. Like this having this additional, additional insight, additional data is just absolutely critical to being able to solve many of the problems that that we exposed through the trends that we've that we've covered today. Um and when we look at you know, kind of the why, uh it's obvious that there's just Gaps in traditional data that need to be filled somehow to be able to clarify the situation, be able to adjust strategies for lenders from the from the very top of the waterfall in originating uh loans, or even when you're out there marketing for new prospects, all the way through servicing and recovery and both in the consumer world and and small business world. Um when we think about a uh a survey that we that we did recently with DATO, 63% of US lenders reported that they had difficulty in scoring between 20 to 49% of their total applicant population when they use traditional credit data alone. Additionally, 74% reported increased confidence when using alternative data. And you know, we we've done this survey multiple year over year surveys with the same questions. And we continue to get kind of higher numbers of lenders that are reporting increased confidence using alternative data, and kind of on the on the flip side of that, a higher number of lenders that are citing less confidence in decisions that are utilizing traditional data alone. And so when we think about using alternative data at origination, it can more accurately segment risk, both in the full file and thin file consumer populations. And this additional segmentation can not only be used for more precise pricing up front, it can also segment a portfolio better for kind of post-origination monitoring. Um, when we think about kind of how how this is impacting how alternative data impacts small business leading into this year, thoughts or insights on that?

SPEAKER_02 23:32

Yeah, alternative data in the small business lending space is critical because, as we all know, traditional business credit files are incomplete for a large portion of SMBs. The three major impacts alternative data will have on the SMB lending this year will be one, expanding credit access, because many small businesses have thin or fragmented files, and alternative data signals will help lenders evaluate early state businesses and sole prompts. Data that contains digital footprints or domain intelligence or cash flow, payment flow data can be incredibly insightful here. And secondly, faster underwriting. Because alternative data allows lenders to evaluate risk in real time or near real time, it supports instant or near instant SMB lending and marketplace and fintech lending. And then lastly, I know we've already spoken about it before, but better portfolio monitoring. Non-traditional and alternative data enables continuous monitoring, not just origination scoring. And it helps lenders detect changes in business activity, fraud or synthetic business activity, and early operational stress. So by leveraging alternative data here, lenders can intervene earlier and then reduce losses. And final thoughts from me. If you're in the SB lending space, don't sleep on alternative data, especially in those industries that have seen the most stress and potential margin compression over the past 12 to 18 months. How about you, Carrie? How's alternative data affecting servicing and recovering for risk managers and collectors?

Key Takeaways And Where To Learn

SPEAKER_01 25:02

So I fully agree with everything you just said, Amy, by the way. Um, and I'm going to date myself here. But I've been in the uh, and I've said this before on other podcasts, but I've been in the consumer data industry for over 30 years now. And from my perspective, I've been both a customer and now I'm I'm a data provider, right? Um, here at LexusNexus. So the industry has really shifted from this legacy static type of risk model to a more dynamic flow. And let me tell you what I mean by that. When I started back in my day, it was a world of, you know, green screens and fax machines. I worked for a very large reseller of tri-merged credit reports for the mortgage market. And we were taught that anything the lender may need to know about the consumer was on those credit reports. We did some manual verification of the data, but overall, the data needed for lending in mortgage came from the credit reports, period. Today, we know that the traditional credit bureau data is not as complete as those days. There are large swaths of important data content that is simply it's not reported. Or even if reported, it might be being deleted. The National Consumer Assistance Plan or NCAP, right, from 2017 removed all civil judgments and most tax liens from the traditional credit bureau files, limiting that lender's view or servicer's view of the full debt obligations and the activity from a financial perspective that's occurring for those consumers. Around the same time, original creditors began deleting charged-off portfolios after they sold them to debt buyers. And third-party collection agencies adopted consumer-friendly policies to delete collection trade lines once the consumer set up a payment plan or settled the debt. The evolution of buy now pay later, while highly adopted and used by consumers, is simply not reported across those same legacy sources of data. And so by necessity, we are seeing the shift from static risk models and strategies, where for years lenders and servicers may have relied on that, you know, once tried and true credit bureau models, attributes or triggers to a more dynamic flow that incorporates new types of insights and monitoring options to really ensure that more a more complete view of a consumer or AMI a business's financial standing and their financial behaviors. So, you know, wrapping up my thoughts for uh for here, in 2026, the lenders and creditors who thrive and become successful will be those who treat their customers and their lines of credit as living relationships, not static contracts. So if you're listening to this podcast and you use the expanded alternative data like our Banko, Accurant or Risk View solutions, tools that are available today to catch that K-shaped slide before it hits the bottom, you aren't just proactively protecting that bottom line. You're really helping your customers navigate from one of the most complex economic times in recent recent history.

SPEAKER_00 28:08

Amazing. Thank you so much, Carrie and Amy, for joining me today to discuss the key trends shaping this year and for sharing such valuable insights. The credit risk assessment landscape is evolving, and we at LexisNexis Risk Solutions are here to help you tackle this year's challenges and opportunities. For more information and to download the 2026 Credit Trends Infographic, visit risk.lexisnexus.com forward slash credit dash trends. Thank you all for listening and stay tuned for our next episode.