The number of auto loan accounts in financial hardship finally leveled off in June, according to TransUnion’s Monthly Industry Snapshot report released July 23. The growth rate, while still ticking upward, has slowed from previous months, said Satyan Merchant, senior vice president and automotive business leader at the credit reporting agency.
The March financial hardship rate, at 0.64%, was consistent with the pre-COVID rate, according to the report. But that rate jumped 290 basis points (bps) to 3.54% in April, and May’s rate nearly doubled again to 7.04%. Finally, the June rate slowed, ratcheting up only 17 bps to 7.21%.
“To me, [the leveling off] is reflective of a few things,” Merchant said. “We do suspect that there are a good number of consumers who did exit a hardship status in past months.” Financial hardship accounts are defined by TransUnion as those in forbearance, in deferral programs or with frozen status.
Auto accounts 60 days past due dipped 5 bps month over month to 1.50% in June, but remained higher than the 1.23% of 2019. Deferral programs may be delaying the imposition of delinquent statuses, Merchant said, which creates a precarious situation. “We’re in a world where there are a lot of Americans struggling. The way these accommodation programs work is that the consumer can not go into delinquency under the CARES act.”
Of the consumers currently in financial hardship status, 32% are looking to resolve their debt gradually with regular payments, according to the report. Alternatively, 18% would like to see all postponed payments gathered into a lump sum.
However, customers may still be paying down their loans, even with accommodations. “Anecdotally, we did hear that there were some consumers who requested to enter a hardship status, but couldn’t or didn’t, or forgot to turn off their auto payments for the credit card or the auto loan,” Merchant said.
TransUnion does not currently provide data on how many consumers continue to make payments while in financial hardship, he added, but the credit reporting agency may include those numbers in future reports.
Originally published on Auto Finance News