The latest TransUnion Consumer Financial Hardship Study offers clear evidence of the positive impact of the CARES Act for Americans dealing with financial challenges due to the ongoing COVID-19 pandemic. When passing this legislation in late March, policymakers provided Americans, and several industries and businesses, much-needed relief and funding to weather the storm of COVID-19. Now, as they consider the formula of a new relief package, Congress should not overlook the positive impact the first CARES Act has had on American consumers and the broader economy.
The serious impact that COVID-19 has had on the U.S. economy and on individuals, families and businesses is unprecedented. To better understand the severity of impact and the effect of relief, TransUnion has conducted a regular Consumer Financial Hardship Study since March. We survey more than 3,000 adults of all ages, in every state and across various household income levels every month, and with our expertise in consumer credit reporting, we have been able to evaluate how financially secure Americans feel, and how confident they are in the future.
Of course, no one knows when the U.S. will fully recover from the pandemic – and we continue to see the evidence of detrimental effects – our August survey shows clear signs that some of the relief measures passed by Congress are reducing (though not eliminating) the impact. While our survey has recorded a positive impact month-over-month, the percentage of Americans who said they are financially impacted by COVID-19 in August hit the lowest level since March, at 52%. That represents a five-point improvement from the previous month.
Improvements in multiple sectors
As retail shops have begun to reopen and factories have ramped up production, their employees are feeling less strain. Fifty-six percent of manufacturing employees reported financial improvements since July, while 54% of retail employees said the same; those are nine- and seven-point improvements, respectively, in the span of a month.
The TransUnion survey also found that the CARES Act is helping Americans cover basic expenses. More than 1 in 4 Americans (27%) in August said their stimulus checks helped them cover bills over the past month. That is an important note at a time when a little under a third of Americans are concerned about being able to make rent payments.
“Financial hardship” reports decrease for second month
Another TransUnion report offers glimmers of hope for consumers’ debt management. Our monthly industry snapshot for August looked at two important measures. First, the number of accounts in “financial hardship” status — such as a deferred payment, forbearance program, frozen account or frozen past due payment — dropped for the second straight month in all major categories tracked: auto loans, credit cards, mortgages and personal loans. While still significantly higher than the pre-COVID period, this marks the second month of decreases since the onset of the COVID-19 pandemic and follows four months of steady increases.
And that’s not all. A second measure – consumer level delinquency – also dropped across each of these categories. Together these reports are good news for the economy and consumers worried about the impact of COVID on their personal credit health.
Additionally, a recent report from the Consumer Financial Protection Bureau (CFPB) found that, despite increases in unemployment and other economic turmoil caused by the pandemic, “consumers have not experienced significant increases in delinquency or other negative credit outcomes” based on credit record data from March to June 2020.
The road to recovery will be a long one, and there is reason to be vigilant. Reminding us that this situation is still uncertain, the report detected negative movement in 30-day delinquency rates for home and auto loans, an early indication that an account may default. This may suggest that, as deferred payment programs end, consumers are facing increased financial pressure. This tracks other findings from the Consumer Financial Hardship Study that 75% of COVID-impacted consumers are concerned about their ability to pay bills and loans.
So, policymakers can benefit from these findings. The intervention of the first CARES Act provided measurable relief, but with concern continuing and many program benefits ending, the situation could change. These findings from our Consumer Financial Hardship Study offer important guidance for framing the next round of support that will assist the country, our people and the economy as we fully recover.
For more information on how Americans are coping with COVID-19, read the latest version of the Consumer Financial Hardship Study.