(Bloomberg) -- Ally Financial Inc. shares fell the most in a month 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.

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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 4.4% to $34.28 at 10:10 a.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%.

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.

Adjusted earnings per share of 95 cents for the three-month period topped the average estimate of 52 cents. Revenue was $2.1 billion.

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