Recent research from the Consumer Financial Protection Bureau (CFPB) has found that consumers have not experienced significant increases in negative credit outcomes as a result of the COVID-19 pandemic and that negative credit outcomes remain lower than they were prior to the Great Recession of 2007-2009. These findings, from two new reports published by the bureau, help illustrate how consumers have fared during the pandemic and where the consumer credit industry stood prior.
The first report, entitled “The Early Effects of the COVID-19 Pandemic on Consumer Credit,” examines the impact of the coronavirus pandemic on consumer credit outcomes, including: delinquencies, payment assistance, credit access, and account balances. The report uses data from January 2019 to June 2020 from the bureau’s Consumer Credit Panel, a longitudinal and nationally representative sample of approximately 5 million de-identified credit records. It follows up on another report released by the bureau this April that looked at the initial and immediate impact of the pandemic on consumer credit.
The report found that new delinquencies on mortgage loan, auto loan, student loan, and credit card accounts fell between March 2020 and June 2020. The report also found that credit card balances decreased by around 10 percent during the same period, and that consumers did not appear to be accumulating credit card debt as a means of staying afloat financially. These findings weaken the assertions of certain progressive groups that argue that an uptick in consumer complaints to the bureau in recent months indicate massive consumer financial distress.
While the report notes that these positive outcomes may reflect stimulus and unemployed assistance from the CARES Act, it also points out that creditors and lenders have increased assistance to borrowers, and that this 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.” This in part contradicts the prevailing media narrative that more stimulus and further restrictions on credit collections or credit reporting are needed.
The second report is the CFPB’s fourth biennial installment of “The Consumer Credit Market” series, which analyzes trends in and evolution of the consumer credit market. This most recent report studies the state of the credit card market between 2017 and 2018. Under the Credit Card Accountability Responsibility and Disclosure Act, the bureau issues a new report every two years.
Though the report found that consumer credit card debt has continued to grow, exceeding pre-recession levels, it also found that delinquency and charge-off rates remain below historic norms. It also found that credit card availability and access to credit has remained stable in recent years, and that the cost of credit for private label cards has fallen as of late. The report also noted that innovation in that market may benefit both consumers and the market as a whole. On this subject, the report states:
Digital technology is being leveraged to offer consumers more tools to control how they shop for credit cards, how they qualify for different products, how they transact with physical cards or mobile phones, and how they pay for the associated debts. … Technological advancements like machine learning and artificial intelligence incorporating new data sources are increasingly enabling the responsible expansion of credit availability to populations that lack a traditional credit score while also lowering the cost of credit to those with poor credit history.
While many Americans are still struggling due to the economic fallout of the COVID-19 pandemic, these new research findings from the CFPB help to show the lay of the land. Until the data show otherwise, there is no need for the bureau to further regulate the consumer credit marketplace, especially credit collections, credit reporting, and debt settlement. Instead, the CFPB can keep credit flowing and help consumers get back on their feet by getting rid of burdensome #NeverNeeded regulations on mortgages and small-dollar loans.
Further, as coronavirus-related spending talks are once again underway, it’s important that lawmakers and administration officials take heed of these findings and help consumers by working to repeal regulations rather than increasing red tape and adding to the federal deficit.