CHICAGO, May 20, 2020 (GLOBE NEWSWIRE) — A new TransUnion (NYSE: TRU) report found that serious delinquency rates were mostly stable between April 2019 and April 2020 and all delinquencies have dropped between March and April 2020. However, the true consumer credit picture may be distorted because of federal programs and those provided by lenders to alleviate some of the financial hardships borrowers are facing.
To gain greater insight into the payment behaviors of consumers during the first two months of the COVID-19 pandemic, TransUnion (NYSE: TRU) supplemented its quarterly Q1 2020 Industry Insights Report with a newly created Monthly Industry Snapshot Report, highlighting the consumer credit market for the month of April. TransUnion found that the percentage of accounts entering “financial hardship” status has risen dramatically for credit products such as auto loans, credit cards, mortgages and personal loans. Financial hardship status is defined by factors such as a deferred payment, frozen account or frozen past due payment.“Americans are facing challenging economic times, but it is still too early to tell the long-term implications of this pandemic for the credit markets,” said Matt Komos, vice president of research and consulting at TransUnion. “Consumers are currently performing relatively well from a credit perspective, though this is likely due to their use of federal stimulus packages, tax refunds, unemployment benefits and forbearance programs. These factors have led to improved cash flow for some consumers in the near term, but a critical component to the future of consumer credit is a better understanding of how loans that have been deferred will be repaid. A clearer picture regarding serious delinquency rates and other credit variables will help businesses and consumers transact with confidence.”Monthly Industry Snapshot of Consumer Performance by Credit Product*Credit card delinquency rate reported as 90+ DPD per industry standardDespite growing financial hardship within the consumer credit market, the analysis found that consumers are paying down their credit card balances with the average balance per consumer decreasing from $5,645 to $5,437 between March and April 2020. Consumers may be potentially paying down balances to ensure further access to liquidity until there is more clarity as to when shuttered businesses begin to reopen. This also reflects a slowdown in spending behavior, as uncertainty about the future has impacted consumer sentiment and confidence. This trend is significant because credit cards are the most widely used credit product in the U.S. As of Q1 2020, there were 457.6 million credit cards with balances of $814 trillion.A similar phenomenon is occurring in the personal loan market as the aggregate excess payment (AEP) of consumers between March and April increased from $194 to $215. AEP measures, on average, how much consumers are paying over their respective minimum payments.In parallel, TransUnion has been conducting consumer research to learn more about the impacts of COVID-19 on consumer finances. The most recent survey from early May found that of the 59% of Americans who said their household income has been negatively impacted by COVID-19, two in three (66%) say they are concerned about paying their current bills and/or loans. Of this population, 12% state that they are using accommodations offered by their lenders such as forbearance. In addition, 31% of impacted consumers plan to pay a partial amount on their next loan payment. Approximately 44% of impacted consumers also state that they have reached out recently to companies where they have accounts to discuss payment options.“Forbearance and deferment programs are currently providing consumers with payment flexibility and enabling them to prioritize which credit products to pay when faced with limited resources. While these programs are providing consumers with temporary relief, banks and lenders are looking for further regulatory guidance as to what next steps should be taken once stimulus packages dry up. We are likely to have a better sense of the true financial health of consumers impacted by COVID-19 in the coming months,” said Komos.TransUnion’s Q1 2020 Industry Insights Report and Monthly Industry Snapshot Report features insights on consumer credit trends around personal loans, auto loans, credit cards and mortgage loans. For more information, please register for the TransUnion Q1 2020 IIR Webinar. Additional resources for consumers looking to protect their credit during the COVID-19 pandemic can be found at transunion.com/covid-19.Record Number of Consumers Have Access to a Credit CardQ1 2020 IIR Credit Card Summary
The first quarter of 2020 saw continued growth in the credit card industry with 184.7 million consumers now having access to a credit card. There are 457.6 million credit cards in the U.S. – up nearly 25 million from one year ago. Following seven consecutive quarters of origination growth, Q4 2019 was another record-setting quarter for originations with 18.9 million new accounts – the second straight quarter of originations over 18 million and a growth rate of 14.9% year-over-year. Average credit card debt per borrower rose to $5,653 while consumer delinquency continued to increase to 1.97% in Q1, which is the highest level since 2011.Instant Analysis“Since the World Health Organization declared the COVID-19 outbreak a pandemic in mid-March, the credit card sector has not yet seen the true economic impacts of the virus. At the start of this year the industry was poised for another strong quarter as there was record growth in originations and consumer access to credit. Along with this growth, delinquencies remained relatively stable – in part due to accounts moving into deferment as a result of new COVID-19 legislation. However with rising unemployment and growing consumer debt, we expect lenders to recalibrate their underwriting strategies to mitigate risk.”– Paul Siegfried, senior vice president and credit card business leader at TransUnion
Q1 2020 Credit Card Trends*Note: Originations are viewed one quarter in arrears to account for reporting lag.Personal Loan Market to Transition out of Prolonged Period of GrowthInstant Analysis
“Prior to the impacts of COVID-19, the personal loan market was well-positioned for another strong quarter. However in response to the pandemic, lenders began to deploy new strategies to stabilize their portfolios. Several lenders instituted stricter underwriting guidelines and pulled back on marketing and prescreen campaigns to limit their exposure during the expected downturn. As a result, we expect originations to start declining following several years of significant growth. Forbearance programs may help keep delinquencies in check for the near-term, but as consumers start rolling off these forbearance programs over the coming months, we will likely start to see delinquencies tick up.”– Liz Pagel, senior vice president and consumer lending business leader at TransUnion 
Q1 2020 Unsecured Personal Loan Trends*Note: Originations are viewed one quarter in arrears to account for reporting lag.Forbearance Programs Take Hold of Mortgage IndustryInstant Analysis
“Over the past few years we have seen home prices steadily climb, especially in large MSAs and urban centers. A historically low interest rate environment helped drive exceptionally high origination volumes in these high-priced areas as consumers in more expensive homes have a greater incentive to refinance. COVID-19 will have a major impact on the mortgage markets but expect to see strong refinance volumes continue as interest rates remain low. In a survey conducted by TransUnion, at least 11% of consumers are relying on refinancing as a means to help pay for current bills or loans during COVID-19. We expect impacted consumers to continue to take advantage of mortgage forbearance programs, which will keep mortgage delinquency levels reported to a consumer’s credit file low in the near-term.” – Joe Mellman, senior vice president and mortgage business leader at TransUnion
Q1 2020 Mortgage Loan Trends*Note: Originations are viewed one quarter in arrears to account for reporting lag.Following Recent Growth, Auto Industry Expected to Face ChallengesInstant Analysis
“Last quarter the auto market exhibited strong year-over-year origination growth and steady delinquencies, highlighting the underlying health of the market pre-COVID-19. In the current environment, external pressures such as high unemployment rates and low consumer confidence will exacerbate affordability challenges and impact future growth in the auto finance market. We anticipate the auto market will continue to face challenges in the wake of COVID-19 as dealers will be forced to transition away from brick and mortar operations. However, we can expect digital innovation to help transform the space with an increasing number of consumers looking to such channels to initiate and complete the car buying process.”–Satyan Merchant, senior vice president and automotive business leader at TransUnionQ1 2020 Auto Loan Trends*Note: Originations are viewed one quarter in arrears to account for reporting lag.For more information about TransUnion’s Q1 2020 Industry Insights Report, please register for this quarter’s webinar.About TransUnion (NYSE: TRU)
TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.®A leading presence in more than 30 countries across five continents, TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people.http://www.transunion.com/business

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