CFPB report finds consumers kept pace in paying back loans during coronavirus crisis – perhaps due to federal benefits

Consumers have not fallen significantly behind in making their loan payments during the coronavirus crisis, a report from the federal consumer financial protection agency asserted last week based on credit record data analyzed by the agency.

However, those results may have been influenced by federal stimulus payments and extension of unemployment benefits (now expired), the agency added.

In a release, the Consumer Financial Protection Bureau (CFPB) said its report was intended to examine the early effects of the pandemic on consumer credit. It found, the agency said, that new loan delinquencies fell between March and June of 2020. “This is in spite of the sharp increases in unemployment resulting from the pandemic,” the agency said.

According to the CFPB, its analysis focused on mortgage, student and auto loans and credit card accounts performance from March through June. The agency said it used a nationally representative sample of approximately 5 million “de-identified” credit records maintained by one of the three nationwide consumer reporting agencies.

In doing so, the CFPB said its report shows that new delinquencies fell between March and June of 2020. It also found, the agency said, increases in payment assistance from creditors and lenders to borrowers during that period. Student loan and first-lien mortgage accounts had the largest increases in assistance (in terms of magnitude, the agency said). However, increases in assistance for auto loan and credit card accounts were substantial “given that there was effectively zero assistance reported for consumers prior to the COVID-19 pandemic.”

The CFPB said assistance appeared to be concentrated among borrowers residing in areas that were more severely affected by the COVID-19 pandemic and the associated shocks to employment.

However, the report notes, “outcomes may reflect payment assistance provided to American consumers through the CARES Act.” Those included one-time payments of financial assistance and extended unemployment insurance benefits. The benefits expired last month.

In other areas, the CFPB said its report found:

  • Financial institutions closed existing lines of credit and halted credit limit increases on open accounts, which the agency asserted “reduced access to debt.” However, the CFPB stated, the effects were small in magnitude. “Both account closings and credit line reductions primarily affected borrowers with high credit scores, and many of the account closings were on cards that were closed for inactivity.”
  • Credit card balances also fell substantially at the start of the COVID-19 pandemic, then continued a steady decline through to June 2020. The decreases in credit card balances were consistent across groups when broken down by credit score and various demographic factors.

The Early Effects of the COVID-19 Pandemic on Consumer Credit