Consumer financial-hardship agreements slow but remain high

By Sarah Skidmore Sell 
AP Personal Finance Writer

Credit reporting agency TransUnion has found that nearly 3% of common consumer debts were in financial-hardship status at the end of 2020, illustrating that many Americans are struggling to get by financially as the pandemic wears on.

While the latest number is down from a peak of almost 5% in spring, it’s still far above the norm.

Overall, the hardship agreements — which can put a pause on payments or provide consumers other relief — hit their peak in May at 4.77%. In February, just before massive pandemic-related closures and layoffs hit, the measure was at 1.71%.

TransUnion looked at auto, credit card, mortgage and unsecured personal loan products. It found that 2.87% were in a financial hardship agreement as of the end of December, according to information released Tuesday.

The report did not look at student loans.

TransUnion found that 5.36% of mortgages were in hardship status in December, down from highs of over 7% in the spring, According to the year-end data, 2.93% of auto loans were in such agreements, 2.42% of credit cards and 3.36% of personal loans.

Furthermore, TransUnion found that consumers had varying preferences of how they’d like to resume payments. About 25% wanted to resume regular payments and extend the length of the loan; 19% of consumers wanted to extend the accommodation; and 17% preferred to create a repayment plan to catch up while making larger payments.

Typically the length of a hardship agreement and plans to resume payments are established by the lender based on a consumer’s needs.

TransUnion emphasized that consumers should still contact their lenders if they are struggling, said Jason Laky, executive vice president and head of the agency’s financial services business. He said lenders, particularly at times like these, are willing to work with consumers.

“It is in nobody’s interest to be delinquent or stay delinquent,” Laky said. “Even if we are still later in the pandemic, folks should not feel shy about reaching out.”