Rising consumer confidence could boost borrowing

The past couple of months have been strong for the consumer in the United States, and that didn't change in August, which saw a bump in confidence levels. Should this translate into increased spending, short term lenders should be ready for more applications as borrowing activity tends to follow a jump in consumer expenditures.

The Conference Board Consumer Confidence Index increased to 81.5 in August, following a decline in July, while the Expectations Index jumped to 88.7 from 86 in the previous month.

"Consumer confidence increased slightly in August, a result of improving short-term expectations," said Lynn Franco, director of economic indicators at The Conference Board. "Consumers were moderately more upbeat about business, job and earning prospects. In fact, income expectations, which had declined sharply earlier this year with the payroll tax hike, have rebounded to their highest level in two and a half years."

Bump in retail sales signal spending pick up
Consumers already showed they were more willing to spend in July, with an increase in purchases at retailers for the fourth consecutive month.

U.S. retail and food services sales for July reached a seasonally adjusted rate of $424.5 billion, up 0.2 percent from the previous month and 5.4 percent year-over-year, according to the Department of Commerce.

"We're seeing sales pick up in multiple categories - that's a promising sign that consumer spending might be a little bit stronger in the third quarter," Michael Brown, economist with Wells Fargo Securities LLC, told Bloomberg. "We've seen wage and salary growth continue to expand with the pace of employment. That's helped support some additional consumer activity."

ID verification important with high borrower demand
With the potential for an influx of applications in the near future, financial institutions offering short term lending might want to re-visit their ID verification procedures as criminals may try to take advantage of the busy season to fraudulently obtain loans.

Identity thieves generally attempt to open lines of credit and loans using stolen names, so it is important for short term lenders to be part of the defense against this type of crime. Even if these lenders are unable to stop the crime, they can still be beneficial to consumers. Those that see their consumer credit scores fall as a result of identity theft can take advantage of a short term loan to help cover their monthly bills while they regain their financial footing.