Consumers Remain Resilient Despite Broader Economic Challenges
24 September 2020 - 10:00PM
Serious delinquency rates in August improved once more across all
consumer credit segments even as the number of people in
accommodation programs dropped for the second consecutive month.
Despite positive consumer credit performance, TransUnion’s (NYSE:
TRU) latest Monthly Industry Snapshot also points to potential
challenges in the near future.
During the month of August, serious consumer-level delinquency
rates improved for auto loans, credit cards, mortgages, and
personal loans. Since the start of the pandemic in March 2020,
consumer performance has been mostly positive with continued
month-over-month improvements for many of these products.
“A significant percentage of consumers utilized financial
accommodations to defer or freeze payments during the early stages
of the pandemic. As the first wave of consumers exit accommodation
and a period of excess liquidity, they are returning to their debt
obligations and continuing to perform,” said Matt Komos, vice
president of research and consulting at TransUnion. “Consumers who
still remain in hardship could be more likely to face income losses
and thus have more difficulty exiting these programs than consumers
who may have entered into hardship programs as a precautionary
measure.”
August Industry Snapshot
of Consumer-Level Delinquency
Performance by Credit Product
Timeframe |
Auto |
Credit Card |
Mortgage |
Personal Loans |
August 2020 |
1.39% |
1.23%* |
1.03% |
2.53% |
July 2020 |
1.43% |
1.37%* |
1.08% |
2.79% |
June 2020 |
1.50% |
1.48%* |
1.07% |
3.11% |
May 2020 |
1.55% |
1.76%* |
1.14% |
3.14% |
April 2020 |
1.33% |
1.87%* |
1.27% |
3.27% |
March 2020 |
1.37% |
1.96%* |
1.40% |
3.40% |
August 2019 |
1.32% |
1.72%* |
1.45% |
3.08% |
*Credit card delinquency rate reported as 90+ DPD per
industry-standard; all other products reported as 60+ DPD
The August Monthly Industry Snapshot Report found the percentage
of accounts in “financial hardship” continued a downward
month-over-month trajectory for auto loans, credit cards,
mortgages, and personal loans from the months of July to August.
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.
Across all credit products, the percentage of accounts in
financial hardship during the month of August 2020 dipped to
pre-May levels. Accommodation programs provided consumers with
payment flexibility and added liquidity during the course of the
pandemic. However, as the number of consumers leveraging such
programs decreases and government relief funds are not expected to
renew, many consumers may find themselves at an inflection
point.
August Industry Snapshot
of Financial Hardship Status by Credit
Product
Timeframe |
Auto |
Credit Card |
Mortgage |
Personal Loans |
August 2020 |
4.32% |
2.21% |
5.92% |
5.14% |
July 2020 |
6.16% |
2.83% |
6.15% |
6.92% |
June 2020 |
7.21% |
3.57% |
6.79% |
7.03% |
May 2020 |
7.04% |
3.73% |
7.48% |
6.15% |
April 2020 |
3.54% |
3.22% |
5.00% |
3.57% |
March 2020 |
0.64% |
0.01% |
0.48% |
1.56% |
August 2019 |
0.47% |
0.01% |
0.86% |
0.26% |
Potential Challenges on the Horizon
While serious delinquency rates continued to decline in August,
TransUnion observed some negative movement in 30-day delinquency
rates. This metric, which may serve as an early indication that an
account will default and potentially be charged off, increased
slightly in August 2020 for the two largest payments in the
consumer wallet – auto and mortgage.
“This uptick for both products could signify that consumers are
starting to roll forward on deferred payments as they come off of
hardship programs. However, it’s still much too early to tell. It
could simply be a missed or delayed payment that is late by a few
days or weeks, though the consumer’s intention is still to make the
payment,” added Komos.
Close attention is being paid to delinquency levels as
TransUnion’s latest Financial Hardship Survey from the week of
August 24th found that COVID-19 continues to financially impact
consumers. While the percentage of financially impacted Americans
dipped to 52% – the lowest level since the ongoing survey series
began in March – the concern among impacted consumers regarding
their ability to pay bills and loans remains high (75%).
According to the survey, about one-third of impacted consumers
are turning to savings to pay bills or loans and 13% cited they
plan to open new credit cards. Despite these concerns, data from
the monthly snapshot found that consumers are continuing to make
payments as the average credit card balance per consumer dropped to
$5,127 in August, compared to $5,686 the previous year. In
addition, the average Aggregate Excess Payment (AEP), the average
amount consumers are paying over their respective minimum payments,
increased to $330 in August 2020, though similar to what was
observed at the same time last year ($300).
“Many consumers have continued to make payments even when
enrolled in financial accommodation plans. The real litmus test in
regards to consumer credit health will become apparent in the
coming months when these safeguards begin to expire and consumers
have less payment flexibility,” concluded Komos.
TransUnion’s August 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
Contact |
Dave Blumberg |
|
TransUnion |
E-mail |
dblumberg@transunion.com |
Telephone |
312-972-6646 |
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