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Performance in the Consumer Credit Market Holds Steady as Number of Borrowers in Financial Hardship Status Stabilizes

CHICAGO, July 23, 2020 (GLOBE NEWSWIRE) — A new TransUnion (NYSE: TRU) consumer credit snapshot found the percentage of accounts in “financial hardship” started to level off for credit products such as auto loans, credit cards, mortgages and personal loans during the month of June 2020. Some of this leveling off was due, in part, to accounts coming out of financial hardship status in June.
Accounts in financial hardship – defined by factors such as a deferred payment, forbearance program, frozen account or frozen past due payment – have largely kept delinquency numbers in check as consumers continue to navigate the ongoing impacts of COVID-19. TransUnion’s financial hardship data includes all accommodations on file at month’s end, and includes any accounts that were in accommodation prior to the COVID-19 pandemic.Accommodation programs have provided consumers with much needed payment flexibility as external triggers such as rising unemployment and a decrease in government relief funds have started to shape the future outlook of the consumer wallet.“In the early months of the pandemic, unemployment benefits and relief from the CARES Act gave consumers a bit of a cushion, leaving the consumer fairly well-positioned from a cash flow perspective,” said Matt Komos, vice president of research and consulting at TransUnion. “Lenders have been working with consumers during this time of uncertainty by extending financial hardship offerings that help them understand and manage their financial situation. These accommodations have been working as intended and have helped thwart a material breakdown in delinquency performance in the near-term.”Since the pandemic began in March 2020, delinquency performance has held steady, with credit products across auto, credit card, mortgage and personal loans all showing a recent month-over-month improvement in performance from May to June 2020.Credit cards saw the greatest decline in delinquency over this period with borrowers 90+ days past due (DPD) decreasing from 1.76% to 1.48% month-over-month. This decrease also held true for accounts in 30+ DPD delinquency status – an early indication that may signal consumer distress – by decreasing from 3.06% to 2.66% from May to June (compared to 3.49% at 30+ DPD in June 2019).Consumer balances for credit card also showed a 7.41% year-over-year decline from June 2019 to June 2020 as well as a monthly balance decrease of $43 since May. These decreases may signify that consumers are continuing to manage debt prudently and are paying down their existing card balances. At the same time, overall consumer credit lines have declined from $24,641 in June 2019 to $23,724 in June 2020, which is also down from $23,800 in May 2020.“These are signs of a credit market that continues to function despite the spike in consumer unemployment,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion. “When there is uncertainty in the market, consumer credit performance is highly scrutinized and new accounts generally will not receive the same type of credit limit as they might have prior to a crisis. However, the longer individuals who are not in an accommodation program perform well, the more likely additional credit will be extended.”*Credit card delinquency rate reported as 90+ DPD per industry standard; all other products reported as 60+ DPDOver the course of the pandemic a substantial segment of consumers have continued to make payments, but are also proactively engaging with their lenders to discuss payment options. TransUnion’s ongoing Financial Hardship Survey indicated that of consumers with a current financial accommodation on a loan, 32% are in favor of repayment plans that will allow for paying down debt gradually while continuing regular payments. A smaller percentage (18%) preferred paying off all postponed payments with a lump sum and 21% indicated they would like financial accommodations to be extended further.“By many accounts, we are still in the early phase of the pandemic, and there is some uncertainty still around the nature of the economic recovery we may experience. It will likely be months before the financial impacts of COVID-19 begin to materialize from a credit performance standpoint, and some of this will be dependent on any additional government actions. During this period of time, lenders will need deeper consumer insights to better calibrate risk across their portfolios and make more informed decisions,” concluded Komos.TransUnion’s June Monthly Industry Snapshot Report features insights on consumer credit trends around personal loans, auto loans, credit cards and mortgage loans. Additional resources for consumers looking to protect their credit during the COVID-19 pandemic can be found at transunion.com/covid-19.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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