Despite sharp increases in unemployment between March and June of this year, consumers did not experience significant increases in delinquency or other negative credit outcomes due to the onset of the COVID-19 pandemic, according to a new report focusing on the early effects of the pandemic, which was released by the CFPB on Monday.
Utilizing a sample of approximately 5 million credit records, the report indicated that new delinquencies fell between March and June of 2020 and showed increases in payment assistance from creditors and lenders to borrowers. The report, which focused on mortgage, student and auto loans and credit card accounts, noted that outcomes may reflect payment assistance provided to American consumers through the CARES Act.
Student loan and first-lien mortgage accounts had the largest increase in assistance in terms of magnitude, while increases in assistance on auto loan and credit card accounts were substantial given that there was “effectively zero assistance reported for consumers prior to the COVID-19 pandemic,” according to the report.
Additionally, 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, the report stated.
The report also indicated that financial institutions reduced access to credit card debt both by closing existing lines of credit and by halting credit limit increases on open accounts, but those 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, according to the report.
Further, credit card balances fell substantially at the start of the COVID-19 pandemic, but continued a steady decline through to June 2020, and the decrease in credit card balances were consistent across groups when broken down by credit score and various demographic factors, the report stated.
The full report can be accessed by clicking here.