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Financial Services Law Insights and Observations

CFPB examines early effects of Covid-19 on consumer credit

Federal Issues CFPB Covid-19 Consumer Finance

Federal Issues

On August 31, the CFPB released a report on the early effects of the Covid-19 pandemic on consumer credit outcomes. The report analyzed a “nationally representative sample of approximately five million de-identified credit records maintained by one of the three nationwide consumer reporting agencies,” and examined trends in delinquency rates, payment assistance, credit access, and account balance measures. According to the report, trends showed that there was an overall decrease in delinquency rates since the start of the pandemic among auto loans, first-lien mortgages, student loans, and credit cards; however, the Bureau emphasized that the analysis takes a deeper dive “into measuring how these outcomes differed based on consumer and geographic characteristics compared to earlier work.” Highlights from the report include: (i) new delinquencies fell between March and June of 2020; (ii) borrower assistance appeared to be concentrated in areas that were more severely affected by the pandemic, with sharp increases in the number of accounts reporting zero payment due despite a positive balance; (iii) financial institutions closed existing lines of credit and halted credit limit increases for open accounts primarily for borrowers with high credit scores or for inactive cards; and (iv) credit card balances decreased by roughly 10 percent between March and June, which, according to the report, is consistent with other data that shows a decline in consumer spending.