About 15 million credit-card accounts and 3 million auto loans didn’t get paid in April as the coronavirus ravaged the economy, data show
WSJ MAY 20/2020 BEHIND PAYWALL MARKETS
THIS WAS BEFORE THE MASS UNEMPLOYMENT OF MAY!!!
THE CAR LOAN INDUSTRY ALONE COULD CAUSE CAPITALISM TO CONTINUE INTO CRISIS WITH A CRASH IN REPAYMENTS
LOOK OUT BELOW
The US economy is caving in, but overdue debts are dropping
May 20, 2020
By John Detrixhe
Americans are steeling themselves for the biggest economic hit since the Great Depression. But even as unemployment skyrockets, overdue consumer debt is, for the moment at least, in decline.
The economy went into freefall this year, because of restrictions aimed at containing the coronavirus pandemic. Even so, the percentage of borrowers who were past due on auto loans, credit cards, personal loans, and mortgages fell last month compared with March, according to TransUnion data. Delinquencies for mortgages and personal loans were also
lower in April than a year ago.
The divergence between a crumbling economy and overdue debts probably comes down to forbearance from lenders, according to Matt Komos, vice president of research and consulting at TransUnion. Financial companies were in pretty good shape going into this recession, and they’re fortified with enough capital to absorb losses for a while. Consumers have also gotten respite from the $2 trillion Cares Act, which includes a $1,200 check for Americans and beefed up unemployment benefits.
The loan forbearance is providing a temporary shock absorber for consumers. Leniency on mortgages, for example, might give borrowers some extra short-term cashflow, which in turn helps them stay on top of other debts like credit cards and auto loans, Komos says.
That said, financial stress is unquestionably on the rise. Financial hardship—defined as deferred payments, frozen accounts, and frozen past-due payments—is increasing rapidly.
Accounts in financial hardship
| Date | Automobile | Credit card | Mortgages | Personal loans |
|---|---|---|---|---|
The data show that a severe financial implosion has been delayed but not eliminated. Massive government aid programs and leniency from financial institutions have helped keep consumers afloat, for now. But everything depends on how quickly officials are able to restart the economy, whether emergency support for workers and business lasts long enough, and whether banks and financial institutions can afford to continue freezing accounts and deferring payments on debt.
“It’s temporary shock absorption,” Komos said. “The question becomes, how long and to what extent will it last?”
John Detrix The Future of finance reporter
Future of finance reporter QUARTZ
https://qz.com/1858990/the-us-economy-is-cratering-because-of-coronavirus-but-overdue-debts-are-dropping/
https://qz.com/1858990/the-us-economy-is-cratering-because-of-coronavirus-but-overdue-debts-are-dropping/
May 21, 2020 - Economy & Business
Millions took advantage of financial hardship programs in April for credit cards and auto loans
Dion Rabouin
Millions took advantage of financial hardship programs in April for credit cards and auto loans
Dion Rabouin
Reproduced from TransUnion; Table: Axios Visuals
The number of borrowers not making payments on their credit cards and auto loans rose by thousands of percentage points in April as nearly 15 million credit cards and 3 million auto loans were placed in financial hardship programs.
The state of play: The numbers have surged from March, when less than 0.01% of credit cards and about 0.6% of auto loans were in the programs, according to data from credit reporting agency TransUnion.
Yes, but: The programs allow borrowers to temporarily stop making payments, suggesting voluntary elections rather than missed payments.
The big picture: TransUnion notes that its measure of consumer liquidity has increased as forbearance programs reduce monthly minimum payment obligations and free up capital for Americans.
The company also notes that credit card balances are decreasing as consumers reduce spending and make larger payments.
Credit scores generally have been stable with overall credit ratings actually increasing with fewer consumers in the subprime risk tier.
Between the lines: Mortgage delinquency rates declined slightly, with 94.4% of loan holders current in April, up from 93.7% in March, and the foreclosure rate has ticked down from March by 9.7 percentage points.
Go deeper: "Astronomical" U.S. debt from coronavirus measures will reshape the Treasury market
The number of borrowers not making payments on their credit cards and auto loans rose by thousands of percentage points in April as nearly 15 million credit cards and 3 million auto loans were placed in financial hardship programs.
The state of play: The numbers have surged from March, when less than 0.01% of credit cards and about 0.6% of auto loans were in the programs, according to data from credit reporting agency TransUnion.
Yes, but: The programs allow borrowers to temporarily stop making payments, suggesting voluntary elections rather than missed payments.
The big picture: TransUnion notes that its measure of consumer liquidity has increased as forbearance programs reduce monthly minimum payment obligations and free up capital for Americans.
The company also notes that credit card balances are decreasing as consumers reduce spending and make larger payments.
Credit scores generally have been stable with overall credit ratings actually increasing with fewer consumers in the subprime risk tier.
Between the lines: Mortgage delinquency rates declined slightly, with 94.4% of loan holders current in April, up from 93.7% in March, and the foreclosure rate has ticked down from March by 9.7 percentage points.
Go deeper: "Astronomical" U.S. debt from coronavirus measures will reshape the Treasury market
Financial Hardship Study | TransUnion Canada
Learn more about how households are being impacted financially by the ... Learn how credit cards affect your credit score. ... The impact due to COVID-19 in Canada. We're conducting weekly global Consumer Financial Hardship studies to ... how consumers are being impacted financially by the COVID-19 health crisis
The impact due to COVID-19. We're conducting global Consumer Financial Hardship studies to better ... how consumers are being impacted financially by the COVID-19 health crisis. ... Our next report will be available here Friday evening, June 5. ... TransUnion has studied the financial impact of COVID-19 across five ...
Apr 30, 2020 - A just-released TransUnion (NYSE: TRU) global report including ... impacted by COVID-19, Canadian Gen Z (ages 18-25) consumers face ... suggests the combination of financial relief measures and more time ... greater hardships than Millennials in Canada, it may be that we see ... 52 Week High: $101.16 ...
3 days ago - TransUnion's quarterly Industry Insights Report and monthly industry ... Financial hardship status is defined by factors such as a deferred ... though this is likely due to their use of federal stimulus packages, tax ... to learn more about the impacts of COVID-19 on consumer finances. ... 52 Week Low: $52.50.
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