On July 27, 2021, the Consumer Financial Protection Bureau (CFPB)
provided insight into the economic recovery by issuing a press
release regarding the state of credit applications. On July 28, 2021, to
further the goal of helping consumers navigate the (hopefully) post-pandemic world,
the CFPB issued a press
release unveiling a tool to help renters and landlords access federal
assistance.
Credit Applications
According to the CFPB’s July 27, 2021 press release, by May
2021, consumer applications for auto loans, new mortgages, and revolving credit
cards had mostly returned to pre-pandemic levels. Prime and near-prime consumers
are driving the recovery; subprime and deep-subprime applications remain down. As with previous reports from May and December
2020, the CPFB noted an increase in credit applications, particularly from
borrowers with below prime credit scores in conjunction with federal stimulus payments.
Key findings by the CFPB include:
- Auto loan inquiries saw a drop of 52 percent by
the end of March 2020 and returned to their usual pre-pandemic trend by January
2021.
- New mortgage credit inquiries saw a smaller drop
in March 2020 compared to other types of inquiries and then surged.
Subsequently, inquiries have exceeded their usual, seasonally adjusted volume
by 10 to 30 percent, reflecting the unusually high activity in the mortgage
market throughout the pandemic.
- Revolving credit card inquiries took the longest
to recover from the initial March 2020 decline until March 2021, when these
inquiries reached their usual levels.
- Consumers with deep subprime credit scores
showed the largest decline in auto loan inquiries compared to prior years,
followed by inquiries from consumers with subprime credit scores. These
consumers also showed declines in new mortgage and revolving credit card
inquiries.
- Changes in auto loan and new mortgage
applications were quite varied across the states, while changes in credit card
applications were generally uniform.
Online Tool to help Renters and Landlords
On July 28, 2021, the CFPB released an online tool to help
renters and landlords impacted by the pandemic easily find and apply for
payment assistance for rent, utilities, and other expenses. The Rental Assistance Finder will
make it easier for renters and landlords to connect with federal, state, and
local rental assistance programs in their area.
According to a CFPB analysis of Census
Household Pulse Survey data from
June 23–July 5, 16 percent of adults living in households who rent said they
are currently behind on their payments. Of adults living in households behind
on rent, 49 percent, or approximately 3.6 million of them, say that eviction in
the next two months is somewhat or very likely.
insideARM Perspective:
The last eighteen months or so have led to uncertainty throughout the accounts receivable management industry. While the news regarding credit applications will likely not have an immediate impact on the ARM industry, a return to some stability and normalcy is surely a welcome sign.
Conversely, the online tool offering renters
and landlords a resource to find assistance in their areas might have an immediate impact on consumers and the ARM industry. Many consumer advocates believe the next economic crisis is going to be related to evictions, as there are a significant number of consumers who are not
prepared to pay now-due back rent and will be evicted from their
homes.
Aside from the obvious impact to consumers, should this scenario come to
fruition, the accounts receivable management industry will likely feel a
significant impact; people who don’t have a place to live will not jump at the
opportunity to pay a delinquent bill. Billions of dollars have been made
available for consumers and landlords during the pandemic, should the online
tool do what the CFPB hopes it will do; it will mitigate the impact on
consumers and the financial sector.
