(Bloomberg) -- Ally Financial Inc. shares fell after the auto lender gave a more pessimistic outlook for loan charge-offs and lowered its net interest margin forecast as consumers struggle with expensive debts.

Most Read from Bloomberg

• A Broken Oil Pipeline Plunges South Sudan’s Capital Into Chaos

• Drug Decriminalization Spawns a Political Debacle for Progressives

• Cities Look to AI to Flag Residents’ Trash and Recycling Mistakes

• Inside the ‘Utopias’ of Mexico City

• One City’s Plan to Re-Link a Neighborhood That Robert Moses Divided

The firm has tightened its criteria for who qualifies for an auto loan, increasing verification requirements for proof of employment and income and lowering approvals for higher monthly payments, according to a company presentation.

“Retail auto net charge-offs of 2.24% are elevated, but we are confident the curtailment actions we’ve taken will drive losses lower over time,” Chief Executive Officer Michael Rhodes said in a statement Friday.

Ally shares dropped 1.6% to $35.27 at 1:30 p.m. in New York, paring an earlier decline of as much as 8.3%.

Chief Financial Officer Russ Hutchinson said last month that the lender’s retail auto book might underperform because borrowers are struggling with high inflation and a weakening employment picture, sending shares tumbling at the time. As Ally’s credit challenges have intensified, he said, the firm may have to put aside more reserves to cover bad loans.

Hutchinson’s comments contrasted with what other lenders said they have been seeing over the past few months, in particular that US consumers continue to spend.

The consolidated net charge-off rate is now predicted to fall within a range of 1.50% to 1.55%, and the retail auto net charge-off outlook increased to a range of 2.25% to 2.30%, up from a previous forecast of 2.1%.

“It’s going to be harder for longer, I think is our message,” Hutchinson said in an interview. “We do expect improvement to come, in terms of credit costs.”

Provisions, Charge-Offs

The third-quarter provision for credit losses increased to $645 million, in line with the $649.1 million expected by analysts. Net charge-offs were below expectations of $542.2 million, coming in at $517 million for the period.

Auto originations came in at $9.4 billion, compared with analysts’ estimate of $10.4 billion. Hutchinson said that consumers are more used to the bite of inflation, and the impact it can have on their budgets, boding well for future auto loans. They also have more choice, given greater used auto supply.

“I do think the consumer is better placed today to make a better decision,” he said.