Sanjay Sakhrani: Okay. Maybe just to follow up on credit. I think when we look at the peers. It seems like they are kind of turning the corner on credit. It seems like there’s gradual progress on your front. It just seems like when you qualitatively talk about your loan portfolio, it seems that there is a little bit more pressure on your end customer. Is it fair to say that, the inflation and the higher rates really hit them a little bit more disproportionately relative to other issuers in this space or when you parse out same customers inside those portfolios, they are behaving the same way. And what’s the light at the end of the tunnel, as inflation is receding, are you seeing better behavior. I am just curious just thinking through your credit performance? And then maybe just, sorry, follow-up on that, the reserve, right, progression over the course of this year, maybe you could just talk about how you are thinking about it? Thanks.
Perry Beberman: Yeah. So it’s interesting to hear you comment that others are turning the corner, because that actually can be thinking a little bit the opposite. I have been — what we have been looking at, we have been seeing competitors have erosion of loss rates and delinquencies at a little faster pace than we have and we are still obviously seeing some pressure. But when you look at lag loss rates and other things, fourth quarter this year was fourth quarter last year. I don’t think that statement hold. So, but your point is right said, because the consumers that we serve. When you think about the consumers that are driving the — driving engine within the economy as a top third of consumers. And yeah, they are seeing a little bit of higher rates on things and it’s an inconvenience for them.
But the other two-thirds of Americans that are feeling the pressure. And as you noted, if that — if inflation, it’s — the products are costing more, we saw something the other day from an EY [ph] study where you said, the monthly cost for consumers are up $1,000 per month compared to what they were in 2019. That — that’s $20,000 a year and their wages haven’t kept up. Now what’s happening is wage growth is starting to outpace inflation, inflation is coming down and that’s going to benefit the two-thirds that we serve. And I’d say, we probably serve the middle third in there. And the pressure they are feeling and the lag effect of higher interest rates are coming through, so they are seeing the drawdown and your savings are seeing the mounting debt, there’s pressure and that’s why it’s credit actions that we take will take a little time to take hold, but that’s what gives us the confidence as we move into the second half of next year.
I hope that answered that first part of your question.
Sanjay Sakhrani: Yeah.
Perry Beberman: And as it relates to…
Ralph Andretta: Reserve rate…
Perry Beberman: … reserve rate, let’s see, I think, we have been very transparent about what our belief was going to be with the reserve rate and we got ahead a little bit, right? We are looking around the corner. We increased the reserve rate recognizing that a lot of reserve models are geared towards changing unemployment. We took an approach, we said, there’s a lot of things model don’t care for which is a period of rapid inflation, persistently high rapid rise in interest rates. So that conservatism that we had placed in there is playing out and we feel confident that we have sufficiently cared for what’s ahead of us in the first half of the year. And candidly in the guidance that I gave where we said, hey, this reserve rate should remain pretty steady through most of the year, it is possible as you enter the back half, we start to see lower delinquency formation, the roll rate starts to improve and better economic outlooks.
I would expect that the reserve rate will start to come down.
Sanjay Sakhrani: Okay. Perfect. Thank you.
Perry Beberman: Thanks, Sanjay.
Operator: Our next question comes from Moshe Orenbuch with Cowen. Please go ahead.
Moshe Orenbuch: Great. Thanks. Perry and Ralph, I am hoping you could talk a little bit just as to — you — maybe unpack a little bit your expectations for balanced growth in 2024. You talked about slowing spend, you talked about some other actions that you have taken. Maybe if you could a little more granularity about some of those things and what that means, and perhaps, what that might mean in terms of relationships with your partners? And I have got a follow-up.
Perry Beberman: Yeah. So some of it. Moshe, thanks for the question. Some of it is geared towards the environment we are operating in and we have talked about this since, Ralph, he took over this company and I joined and Val and Tammy. We are focused on responsible growth at any more challenging economic times, you tightened the credit buybacks, lines and fewer new accounts and so last year we put on a smaller vintage than we did the year before. We are expecting a smaller vintage in 2024. And it’s kind of math, right? When you have a period of time when losses are going to be over 8%, the gross losses are even higher than that. So the attrition that’s coming off the existing book, it’s not getting replaced at the same rate, because you have a smaller front book coming on and within the book that you are putting on you have lower lines and there is also not as much economic activity as consumers are trying to moderate their spend.
So it’s — then as you get towards the back part of the year, you start to have to resumption of spend lower losses and you kind of hit that trajectory, that inflection point, we should start to have growth again.
Ralph Andretta: Yeah. Moshe, I think about it. I am comfortable with low single-digit loan growth like BJs. I think that’s — given the economy, given the pressures, that we are seeing out there, given some uncertainty, I think, we are — I am comfortable with that growth. I think would be concerning if we would came out with something much higher than that in this type of environment. So I think conservativism and managing our growth responsibly is what we have done from day one and we will continue to do that.
Moshe Orenbuch: Okay. When you think about the mitigating actions post the implementation of the late fee thing. Are there any issues with respect to interest rate caps, either statutory caps or cap that you would impose in terms of the level of rates, particularly given the — your kind of average balances per account as you think about implementing those actions?
Perry Beberman: Moshe, that’s a good question and one I think the industry is grappling with. This is — you basically hit the mark on one of the issues that I think that the unintended consequence of the CFPB action is that is going to cause much higher rates for a much broader set of the population, everybody is going to pay for those that are late and how high the rates will go will be pretty much market dependent. It’s not comfortable pushing rates up into the mid-to-high 30%, but that’s where things are getting pushed to.
Ralph Andretta: Yeah. I think, unfortunately, what — the consequence of this action, wherever it lands credit is going to be more expensive for everyone and people that have access to credit today may not have access to credit tomorrow and I think, unfortunately, that’s going to be part of the outcome.
Moshe Orenbuch: Got it. Thank you.
Operator: Our next question comes from Jeff Adelson with Morgan Stanley. Jeff, please go ahead.
Jeff Adelson: Yes. Hi. Thanks for taking my question. I guess I just wanted to dig in a little bit more again on the late fee impact that you are outlining here with no partner considerations. Could you just clarify what that means, is that more than normal formulaic RSA that offsets or is that already considered or is it more just what your contracts allow you to do in the event of some adverse versus change to the regulatory environment?
