A new TransUnion (NYSE: TRU) report found that serious delinquency
rates were mostly stable between April 2019 and April 2020 and all
delinquencies have dropped between March and April 2020. However,
the true consumer credit picture may be distorted because of
federal programs and those provided by lenders to alleviate some of
the financial hardships borrowers are facing.
To gain greater insight into the payment behaviors of consumers
during the first two months of the COVID-19 pandemic, TransUnion
(NYSE: TRU) supplemented its quarterly Q1 2020 Industry Insights
Report with a newly created Monthly Industry Snapshot Report,
highlighting the consumer credit market for the month of April.
TransUnion found that the percentage of accounts entering
“financial hardship” status has risen dramatically for credit
products such as auto loans, credit cards, mortgages and personal
loans. Financial hardship status is defined by factors such as a
deferred payment, frozen account or frozen past due payment.
“Americans are facing challenging economic times, but it is
still too early to tell the long-term implications of this pandemic
for the credit markets,” said Matt Komos, vice president of
research and consulting at TransUnion. “Consumers are currently
performing relatively well from a credit perspective, though this
is likely due to their use of federal stimulus packages, tax
refunds, unemployment benefits and forbearance programs. These
factors have led to improved cash flow for some consumers in the
near term, but a critical component to the future of consumer
credit is a better understanding of how loans that have been
deferred will be repaid. A clearer picture regarding serious
delinquency rates and other credit variables will help businesses
and consumers transact with confidence.”
Monthly Industry Snapshot of Consumer
Performance by Credit Product
Timeframe |
Auto |
Credit Card |
Mortgage |
Personal Loans |
Percentage of Accounts in Hardship |
April 2020 |
3.54% |
3.22% |
5.00% |
3.58% |
March 2020 |
0.64% |
0.01% |
0.48% |
1.56% |
April 2019 |
0.51% |
0.03% |
0.48% |
0.30% |
Percentage of Borrowers 60 or More Days Past Due
(DPD) |
April 2020 |
1.33% |
1.87%* |
1.27% |
3.27% |
March 2020 |
1.37% |
1.96%* |
1.40% |
3.40% |
April 2019 |
1.11% |
1.78%* |
1.32% |
3.35% |
*Credit card delinquency rate reported as 90+ DPD per industry
standard
Despite growing financial hardship within the consumer credit
market, the analysis found that consumers are paying down their
credit card balances with the average balance per consumer
decreasing from $5,645 to $5,437 between March and April 2020.
Consumers may be potentially paying down balances to ensure further
access to liquidity until there is more clarity as to when
shuttered businesses begin to reopen. This also reflects a slowdown
in spending behavior, as uncertainty about the future has impacted
consumer sentiment and confidence. This trend is significant
because credit cards are the most widely used credit product in the
U.S. As of Q1 2020, there were 457.6 million credit cards with
balances of $814 trillion.
A similar phenomenon is occurring in the personal loan market as
the aggregate excess payment (AEP) of consumers between March and
April increased from $194 to $215. AEP measures, on average, how
much consumers are paying over their respective minimum
payments.
In parallel, TransUnion has been conducting consumer
research to learn more about the impacts of COVID-19 on
consumer finances. The most recent survey from early May found that
of the 59% of Americans who said their household income has been
negatively impacted by COVID-19, two in three (66%) say they are
concerned about paying their current bills and/or loans. Of this
population, 12% state that they are using accommodations offered by
their lenders such as forbearance. In addition, 31% of impacted
consumers plan to pay a partial amount on their next loan payment.
Approximately 44% of impacted consumers also state that they have
reached out recently to companies where they have accounts to
discuss payment options.
“Forbearance and deferment programs are currently providing
consumers with payment flexibility and enabling them to prioritize
which credit products to pay when faced with limited resources.
While these programs are providing consumers with temporary relief,
banks and lenders are looking for further regulatory guidance as to
what next steps should be taken once stimulus packages dry up. We
are likely to have a better sense of the true financial health of
consumers impacted by COVID-19 in the coming months,” said
Komos.
TransUnion’s Q1 2020 Industry Insights Report and Monthly
Industry Snapshot Report features insights on consumer credit
trends around personal loans, auto loans, credit cards and mortgage
loans. For more information, please register for the TransUnion Q1
2020 IIR Webinar. Additional resources for consumers looking to
protect their credit during the COVID-19 pandemic can be found
at transunion.com/covid-19.
Record Number of Consumers Have Access to a Credit
Card
Q1 2020 IIR Credit Card SummaryThe first
quarter of 2020 saw continued growth in the credit card industry
with 184.7 million consumers now having access to a credit card.
There are 457.6 million credit cards in the U.S. – up nearly 25
million from one year ago. Following seven consecutive quarters of
origination growth, Q4 2019 was another record-setting quarter for
originations with 18.9 million new accounts – the second straight
quarter of originations over 18 million and a growth rate of 14.9%
year-over-year. Average credit card debt per borrower rose to
$5,653 while consumer delinquency continued to increase to 1.97% in
Q1, which is the highest level since 2011.
Instant Analysis
“Since the World Health Organization declared
the COVID-19 outbreak a pandemic in mid-March, the credit card
sector has not yet seen the true economic impacts of the virus. At
the start of this year the industry was poised for another strong
quarter as there was record growth in originations and consumer
access to credit. Along with this growth, delinquencies remained
relatively stable – in part due to accounts moving into deferment
as a result of new COVID-19 legislation. However with rising
unemployment and growing consumer debt, we expect lenders to
recalibrate their underwriting strategies to mitigate risk.”
- Paul Siegfried, senior vice
president and credit card business leader at
TransUnion
Q1 2020 Credit Card Trends
Credit Card Lending Metric |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Q1 2017 |
Number of Credit Cards |
457.6 million |
432.8 million |
416.5 million |
405.8 million |
Borrower-Level Delinquency Rate (90+
DPD) |
1.97% |
1.89% |
1.78% |
1.69% |
Average Debt Per Borrower |
$5,653 |
$5,554 |
$5,472 |
$5,332 |
Prior Quarter Originations* |
18.9 million |
16.5 million |
16.0 million |
16.0 million |
Average New Account Credit Lines* |
$5,128 |
$5,296 |
$5,283 |
$5,262 |
*Note: Originations are viewed one quarter in
arrears to account for reporting lag.
Personal Loan Market to Transition out of Prolonged
Period of Growth Q1 2020 IIR Personal Loan
SummaryDespite total personal loan balances reaching a
high of $162 billion, balance growth in the personal loan industry
slowed toward the end of Q1 2020 as the COVID-19 pandemic started
to take hold in the U.S. The average new account balance secured by
consumers has largely remained stable year-over-year. With the
onset of COVID-19, lenders started to pull back late in the quarter
and origination growth in the personal loan market hit its slowest
rate of growth in 10 straight quarters, increasing 4.7%
year-over-year in Q4 2019. Comparatively, originations grew 9.7%
year-over-year during the same period in 2018. While delinquencies
have largely remained stable over the past few years, the COVID-19
driven crisis will likely trigger an uptick in delinquencies over
the next few quarters; however forbearance programs will temper the
severity of this impact in the near term.
Instant Analysis “Prior to the impacts of
COVID-19, the personal loan market was well-positioned for another
strong quarter. However in response to the pandemic, lenders began
to deploy new strategies to stabilize their portfolios. Several
lenders instituted stricter underwriting guidelines and pulled back
on marketing and prescreen campaigns to limit their exposure during
the expected downturn. As a result, we expect originations to start
declining following several years of significant growth.
Forbearance programs may help keep delinquencies in check for the
near-term, but as consumers start rolling off these forbearance
programs over the coming months, we will likely start to see
delinquencies tick up.”
- Liz Pagel, senior vice president and consumer
lending business leader at TransUnion
Q1 2020 Unsecured Personal Loan
Trends
Personal Loan Metric |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Q1 2017 |
Total Balances |
$162 billion |
$143 billion |
$120 billion |
$102 billion |
Number of Unsecured Personal Loans |
23.4 million |
21.4 million |
19.2 million |
16.9 million |
Number of Consumers with Unsecured Personal
Loans |
20.9 million |
19.3 million |
17.6 million |
15.7 million |
Borrower-Level Delinquency Rate (60+
DPD) |
3.39% |
3.47% |
3.51% |
3.72% |
Average Debt Per Borrower |
$9,025 |
$8,618 |
$7,986 |
$7,603 |
Prior Quarter Originations* |
5.2 million |
4.9 million |
4.6 million |
3.7 million |
Average Balance of New Unsecured Personal
Loans* |
$5,619 |
$5,432 |
$5,044 |
$5,132 |
*Note: Originations are viewed one quarter in arrears to account
for reporting lag.
Forbearance Programs Take Hold of Mortgage
Industry Q1 2020 IIR Mortgage Loan
SummarySerious delinquency rates declined in Q1 2020 to
1.40%, down four basis points from the same period last year –
reversing the delinquency uptick from the past few quarters.
According to the TransUnion credit database, 5% of all mortgages
are currently in financial hardship, which includes forbearance
programs as of April 2020. Mortgage forbearance programs, which
started in March, have allowed consumers enrolled in those programs
to avoid being labeled as delinquent. This has kept delinquency
rates at manageable levels in Q1 and is expected to continue into
Q2. Prior to the financial impacts of COVID-19, the mortgage
industry experienced significant origination growth, primarily due
to refinancing in Q4 2019. Volumes reached its highest level in 10
years with 2.5 million originations, a growth rate of 63%
year-over-year and nearly 1 million more originations than the same
period last year.
Instant Analysis “Over the past few years we
have seen home prices steadily climb, especially in large MSAs and
urban centers. A historically low interest rate environment helped
drive exceptionally high origination volumes in these high-priced
areas as consumers in more expensive homes have a greater incentive
to refinance. COVID-19 will have a major impact on the mortgage
markets but expect to see strong refinance volumes continue as
interest rates remain low. In a survey conducted by TransUnion, at
least 11% of consumers are relying on refinancing as a means to
help pay for current bills or loans during COVID-19. We expect
impacted consumers to continue to take advantage of mortgage
forbearance programs, which will keep mortgage delinquency levels
reported to a consumer’s credit file low in the
near-term.”
- Joe Mellman, senior vice president and mortgage
business leader at TransUnion
Q1 2020 Mortgage Loan Trends
Mortgage Lending Metric |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Q1 2017 |
Number of Mortgage Loans |
53.9 million |
53.1 million |
53.1 million |
52.8 million |
Borrower-Level Delinquency Rate (60+
DPD) |
1.40% |
1.44% |
1.74% |
2.07% |
Average Debt Per Borrower |
$213,994 |
$208,057 |
$202,470 |
$196,772 |
Prior Quarter Originations* |
2.5 million |
1.5 million |
1.8 million |
2.1 million |
Prior Quarter Average Balance of New
Mortgage Loans* |
$268,908 |
$224,100 |
$229,538 |
$235,361 |
*Note: Originations are viewed one quarter in arrears to
account for reporting lag.
Following Recent Growth, Auto Industry Expected to Face
Challenges Q1 2020 IIR Auto Loan
SummaryDelinquencies remained stable in Q1 2020 at 1.37%
60+ DPD, a slight uptick over the same period last year and within
a delinquency variation of 10 basis points for 11 straight
quarters. The average new account balance continued to grow and
reached an average of $22,764 per consumer – a 2.9%
year-over-year increase. This was largely due to consumers moving
toward larger and more expensive vehicles such as trucks and SUVs.
While the average amount financed continued to rise, the average
monthly payment grew at a slower rate due to lengthening loan terms
and a recent decline in APR. In fact, APRs experienced their first
year-over-year decline in Q4 2019 after 10 consecutive quarters of
growth. Despite concerns around auto affordability, originations
grew 3.1% year-over-year in the fourth quarter, compared to 1.7%
year-over-year in Q4 2018.
Instant Analysis“Last quarter the auto market
exhibited strong year-over-year origination growth and steady
delinquencies, highlighting the underlying health of the market
pre-COVID-19. In the current environment, external pressures such
as high unemployment rates and low consumer confidence will
exacerbate affordability challenges and impact future growth in the
auto finance market. We anticipate the auto market will continue to
face challenges in the wake of COVID-19 as dealers will be forced
to transition away from brick and mortar operations. However, we
can expect digital innovation to help transform the space with an
increasing number of consumers looking to such channels to initiate
and complete the car buying process.”
-Satyan Merchant, senior vice president and automotive
business leader at TransUnion
Q1 2020 Auto Loan Trends
Auto Lending Metric |
Q1 2020 |
Q1 2019 |
Q1 2018 |
Q1 2017 |
Number of Auto Loans |
83.8 million |
82.2 million |
79.7 million |
76.4 million |
Borrower-Level Delinquency Rate (60+
DPD) |
1.37% |
1.31% |
1.32% |
1.30% |
Average Debt Per Borrower |
$19,302 |
$18,845 |
$18,581 |
$18,386 |
Prior Quarter Originations* |
6.9 million |
6.7 million |
6.6 million |
6.7 million |
Average Balance of New Auto
Loans* |
$22,764 |
$22,128 |
$21,678 |
$21,071 |
*Note: Originations are viewed one quarter in arrears to account
for reporting lag.
For more information about TransUnion’s Q1 2020 Industry
Insights Report, please register for this quarter's webinar.
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 |
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Dave Blumberg |
|
|
TransUnion |
|
|
|
E-mail |
|
dblumberg@transunion.com |
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Telephone |
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312-972-6646 |
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