CFPB consumer credit data shows drop in defaults
The Consumer Financial Protection Bureau this week released findings that consumers have not experienced a significant increase in delinquency or other negative credit outcomes during the COVID-19 pandemic.
These results reflect the experiences of ACA International members working with consumers on their accounts over the past few months.
Debt collectors continue to help consumers manage their payments, provide resources on hardship programs and suggest solutions tailored to their financial situation. Consumer calls to agencies have multiplied in recent months. Consumers have asked for help managing their finances and exploring options for hardship due to the ongoing COVID-19 pandemic.
The constant flow of inbound calls experienced by ACA members and the accounts receivable management industry reflects the sentiment expressed in the CFPB report.
According to the CFPB Office of Research report, “The first effects of the COVID-19 pandemic on consumer credit, On mortgages, student and auto loans, and credit card accounts, new defaults declined between March and June 2020.
“Overall, our findings add to the growing literature on the effect of the COVID-19 pandemic on credit scores among American consumers and households. The analysis shows a decrease in delinquency since the start of the pandemic and an increase in aid to consumers, ”reports the CFPB in a press release. Press release on the data.
Creditors and lenders have also increased payment assistance to borrowers, according to the report, which notes that the results may reflect the payment assistance provided to consumers through the CARES Act.
“Student loan and first mortgage accounts had the largest increase in aid in terms of magnitude, but increases in aid on auto and credit card accounts were substantial given that ‘there was effectively no reported help for consumers prior to the COVID-19 pandemic,’ according to the press release. “Aid appears to be concentrated among borrowers residing in areas that have been hit hardest by the COVID-19 pandemic and the shocks associated with employment. “
Additional results include:
- There was a slight reduction in the availability of credit card debt between March and June 2020. Credit limits on existing credit cards decreased slightly, while before March 2020 there was a general trend increased limits. There has also been a slight increase in account closings by credit card issuers. In absolute terms, borrowers with very high credit scores accounted for most account closings.
- Credit card balances also declined significantly at the onset of the COVID-19 pandemic and then continued to decline steadily until June 2020. The decline in credit card balances was consistent across groups. when broken down by credit score and various demographic factors.
- Consumers did not seem to accumulate credit card debt to sustain themselves financially. On average, credit card balances declined by about 10% between March 2020 and June 2020, a drop consistent with other data that shows lower consumer spending.
ACA members continue to work with consumers to establish alternative payment terms for consumers facing unexpected hardships or, for example, during natural disasters like floods or storms.