People are struggling to pay their monthly bills. For many US households, personal finances are being unexpectedly strained as a result of the COVID-19 health crisis. From reductions in working hours and hourly wages to lost jobs and closed businesses, the impact on US households’ income has been swift and severe.
To gain a deeper understanding of these dynamics, TransUnion has been conducting a multi-wave Consumer Financial Hardship Study that tracks changes over time. TransUnion has conducted 11 waves, analyzing responses from more than 27,500 consumers between March 16, 2020 and July 31, 2020.
The study offers utility companies a focused understanding of the impact of COVID-19 on their business. TransUnion is also helping utility companies with access to rich information detailing these trends.
Utility analysis highlights:
- 19% of utility consumers indicate they will not be able to pay their utility bills. Relative to other categories of obligations, utilities are in a more favorable payment position.
- At only 7%, the percentage of consumers enrolled in a financial accommodation for their utilities is one of the lowest of any of the financial obligations analyzed.
- 34% of consumers would prefer a repayment plan that will allow them to gradually catch up on the outstanding debt when financial accommodations end, while making their regular monthly payments at the same time.
- Younger generations have been hit harder by the pandemic, with 26% of Millennials indicating they will not be able to pay their utility bills.
Utilities nationally are under pressure from consumers who are financially stressed due to COVID-19 and the loss of income it has caused. Determining an accurate projection for monthly revenue while reviewing customers’ ability to make payments in a timely fashion is critical. With the pandemic extending into the summer months, actionable data is more important than ever. TransUnion helps in this capacity by providing a clear picture of customers’ financial health, enabling utilities to take the right actions and make better decisions in real time.
More than half of US consumers have had their income negatively impacted by the COVID-19 pandemic. In the latest wave of our survey (July 31, 2020) 57% of US households indicated that their income has been negatively impacted.
Percentage of households with negatively impacted income due to COVID19
As a result of this negative financial impact, a significant percentage of households are concerned about their ability to pay their current bills and loans.
After being relatively stable at approximately 66% for several weeks, the percentage of consumers indicating concern about paying current obligations has increased in back-to-back waves and now stands at 77%. Government stimulus checks and enhanced unemployment benefits have been primary sources of funds to keep many distressed consumers solvent. However, at the time of this posting, the majority of consumers have used up the first government stimulus payment, and the timing of a second round of stimulus checks is uncertain. In addition, it is unknown whether enhanced unemployment benefits will be reinstated after expiring at the end of July. In the absence of further government stimulus, TransUnion expects that the percentage of consumers concerned with their ability to pay their bills will continue to rise.
Percentage of negatively impacted household concerned with being able to pay current loans and bills
Focus on utilities
As part of our analysis, TransUnion looked at holders of different financial and non-financial obligations and the percentage holding each type that indicated they will not be able to pay.
Relative to other categories of obligations, the risk of nonpayment for utility bills is much lower. Of those consumers with a utility bill, 19% indicate they will not be able to pay it, which is significantly lower than the percentage unable to pay rent or credit obligations such as student or personal loans. Only mobile/cell phone and Internet bills have a lower percentage of consumers saying they will not be able to pay.
Loans or bills that consumers are unable to pay differ based on a number of factors, including the importance of that specific bill in their daily life, the absolute dollar value of the bill and whether they have received some type of financial accommodation for a given bill. Given the importance of household utilities and the size of the payments compared to other obligations, utilities appear to be in a relatively good payment position compared to other obligations. These findings provide insight into the payment hierarchy that consumers have relative to various payment obligations.
% of financial obligation holders indicating that they will not be able to pay that obligation (Wave 11 results)
Since mid-March when Transunion began the Consumer Financial Hardship study, an increasing number of consumers with negatively impacted income have reached out to lenders and service providers to discuss payment options. Starting at 40% of consumers in March, the number has risen to 58% in the most recent wave. However, a much smaller percentage, 25%, have actually enrolled in a financial accommodation such as a deferral, forbearance or payment holiday.
The types of debt or bills they have received assistance with differs. At 32%, student loans have the largest percentage of consumers who have received some sort of assistance. This isn’t surprising, since in many cases, student loan lenders automatically enrolled borrowers into a program and didn’t require that consumers opt-in.
At only 7%, the percentage of consumers that have enrolled in a financial accommodation for utilities is one of the lowest of any of the financial obligations analyzed. This speaks to the criticalness of utilities to consumers and indicates they are prioritizing their budgets towards these bills.
% of financial obligation holders indicating that they have enrolled in a financial accommodation for that obligation (Wave 11 results)
How consumers want to repay deferred bills
Consumers and lenders alike are concerned about what will happen once the financial accommodations end. How will consumers deal with the mounting debt and obligations that have been building through forbearance and deferments? Consumers were asked how they would prefer to repay any deferred bill payments once the financial accommodations come to an end. Their responses point to potential insights into their financial situations. The top three preferences are:
- 34% would prefer a repayment plan that will allow them to gradually catch up on the outstanding debt, while at the same time being able to make their regular monthly payments. This group appears to intend to pay all of their obligations, but given the hit their finances have taken as a result of COVID 19, they will need some additional help in the way of time to get their accounts back to current.
- 28% would prefer to extend the accommodations for another few months. This group appears to be concerned with being able to pay their bills in absence of accommodations and, therefore, prefer an extension.
- 23% would prefer to pay the amount due in a lump sum. These consumers may have had smaller dollar amounts deferred and/or may have taken advantage of the financial accommodations made available to them as a precaution and not necessarily due to hardship.
Demographic profile of those unable to pay their utility bills:
- Geographic region: At 20% each, the South and West have the highest percentage of households that indicate they will not be able to pay their utility bills, followed closely by the Northeast at 19%. The Midwest has the lowest percentage of non-payers at 16%.
- Generation: Millennials are the generation with the most consumers saying they will not be able to pay their utility bill (26%), followed by Gen Xers at 20% and Baby Boomers at 11%.
- Environment: Urban households are at the greatest risk of non-payment of their utility bills, with 26% saying they will not be able to pay. Among rural households, 19% indicate they will be unable to pay their utility bills. Suburban households have the lowest risk of nonpayment, with 15% indicating they will not be able to pay.
- Income: Income is the most defining demographic in determining the risk of nonpayment of a household’s utility bill. Among households with an income less than $50,000, 27% indicate they would be unable to pay their utility bills. For the income range between $50,000–$100,000, the percentage not able to pay decreases to 16%, and for those with an income greater than $100,000, 9% are unable to pay their utility bills.
Utility companies nationally can and should access TransUnion data that gives them deeper perspectives into these trends by visiting us online at transunion.com/industry/communications.
Legal Disclaimer: Please note that noted TransUnion analysis was based on responses to the company’s survey, and is not necessarily accurate nor complete information. Also, TransUnion does not intend, and this should not be interpreted as, legal advice; consult your legal counsel for questions and concerns about applicable law and your obligations.