COVID-19: Household Debt During the Pandemic

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COVID-19: Household Debt During the
~~October 22~~December 3, 2020 , 2020
Pandemic
Cheryl R. Cooper,
The Coronavirus Disease 2019 (COVID-19) The Coronavirus Disease 2019 (COVID-19) pandemic has had a large and persistent economic pandemic has had a large and persistent economic
Coordinator
impact across the United States. Fear of infection, social distancing, and stay-at-home orders impact across the United States. Fear of infection, social distancing, and stay-at-home orders
Analyst in Financial Analyst in Financial
prompted business closures and a severe decline in demand for travel, accommodations, prompted business closures and a severe decline in demand for travel, accommodations,
Economics Economics
restaurants, and entertainment, among other industries. This led to a significant reduction in restaurants, and entertainment, among other industries. This led to a significant reduction in

employment and a loss of income in many U.S. households. Unemployment rose rapidly to a employment and a loss of income in many U.S. households. Unemployment rose rapidly to a
Maura Mullins
peak at 14.7% in April and has since fallen to peak at 14.7% in April and has since fallen to 76.9% in .9% in ~~September~~October. Consequently, many . Consequently, many
Americans Research Librarian Research Librarian
~~Americans~~ have lost income and faced financial hardship. Survey results suggest that since have lost income and faced financial hardship. Survey results suggest that since

March 2020,March 2020, about half of all U.S. adults live in a household that has lost some employment income. half of all U.S. adults live in a household that has lost some employment income.
Lida R. Weinstock
~~As of~~During the second the second ~~quarter~~and third quarters of 2020, different types of consumer debt—consisting of of 2020, different types of consumer debt—consisting of ~~mortgages,~~
Analyst in Macroeconomic Analyst in Macroeconomic
mortgages, credit cards, auto loans, and student loans—have exhibited different patterns during credit cards, auto loans, and student loans—have exhibited different patterns during ~~the COVID-~~
Policy Policy

19 the COVID-19 pandemic. Notably, credit card balances declined sharply pandemic. Notably, credit card balances declined sharply by in the second quarter by about $76 billion, the largest about $76 billion, the largest
quarterly decline on record. Mortgage debt increasedquarterly decline on record. Mortgage debt increased ~~slightly~~, and other , and other household debt remained household debt remained

relatively flat. relatively flat.
In addition, during the second In addition, during the second ~~quarter~~and third quarters of 2020, the percentage of delinquent loans declined in most consumer debt markets. of 2020, the percentage of delinquent loans declined in most consumer debt markets.
This pattern differs greatly from that of past recessions, such as the 2007-2009 Great Recession. Some of this decline is due This pattern differs greatly from that of past recessions, such as the 2007-2009 Great Recession. Some of this decline is due
to consumers entering into to consumers entering into loan forbearance agreements when they are having trouble repaying their loans. Loan forbearance agreements when they are having trouble repaying their loans. Loan forbearance
agreements allow borrowers to reduce or suspend payments for a short period of time, providing extended time for agreements allow borrowers to reduce or suspend payments for a short period of time, providing extended time for
consumers to become current on their payments. These agreements do not forgive unpaid loan payments. Instead, borrowers consumers to become current on their payments. These agreements do not forgive unpaid loan payments. Instead, borrowers
must repay the amounts owed, and they typically enter into agreements that allow for repayment over an extended period of must repay the amounts owed, and they typically enter into agreements that allow for repayment over an extended period of
time. time.
Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented many consumers from falling Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented many consumers from falling
delinquent on their loan payments. Part of the congressional response was the Coronavirus Aid, Relief, and Economic delinquent on their loan payments. Part of the congressional response was the Coronavirus Aid, Relief, and Economic
Security (CARES) Act (P.L. 116-136),Security (CARES) Act (P.L. 116-136), signed into law on March 27, 2020. The CARES Act established consumer rights to signed into law on March 27, 2020. The CARES Act established consumer rights to
be granted forbearance for many types of mortgages (Section 4022) and for most federal student loans (Section 3513). The be granted forbearance for many types of mortgages (Section 4022) and for most federal student loans (Section 3513). The
CARES Act’s consumer protections, as well as other financial institution loan forbearance programs, likely helped avoid CARES Act’s consumer protections, as well as other financial institution loan forbearance programs, likely helped avoid
sharp increases in loan delinquencies. The CARES Act also provided fiscal relief, including direct income support, which sharp increases in loan delinquencies. The CARES Act also provided fiscal relief, including direct income support, which
was likely another important factor making it easier for consumers to pay their existing loan obligations. These actions was likely another important factor making it easier for consumers to pay their existing loan obligations. These actions
included enhanced unemployment insurance and relief checks phased out for higher-income taxpayers.included enhanced unemployment insurance and relief checks phased out for higher-income taxpayers.
Given the uncertain trajectory of future COVID-19 outbreaks and their economic impacts, whether these consumer debt Given the uncertain trajectory of future COVID-19 outbreaks and their economic impacts, whether these consumer debt
usage and delinquency patterns will continue is unclear. Future public policy may be able to influence the course of the usage and delinquency patterns will continue is unclear. Future public policy may be able to influence the course of the
economic recovery, which could include extending loan forbearance programs, additional fiscal relief, or other policy economic recovery, which could include extending loan forbearance programs, additional fiscal relief, or other policy
options. Congress is currently debating whether COVID-19 pandemic relief provisions should be extended or whether the options. Congress is currently debating whether COVID-19 pandemic relief provisions should be extended or whether the
cost of these proposals outweigh their benefits. Active legislation that would modify, extend, or create new economic relief cost of these proposals outweigh their benefits. Active legislation that would modify, extend, or create new economic relief
programs includes the Heroes Act (first version: H.R. 6800; second version: H.R. 925) in the House, and the American programs includes the Heroes Act (first version: H.R. 6800; second version: H.R. 925) in the House, and the American
Workers, Families, and Employers Assistance Act (S. 4318) in the Senate. Workers, Families, and Employers Assistance Act (S. 4318) in the Senate.
In addition, consumers’ future access to credit markets may become another In addition, consumers’ future access to credit markets may become another ~~risk~~ris k factor. The congressional response to the factor. The congressional response to the
COVID-19COVID-19 pandemic has primarily focused on helping consumers make existing debt payments rather than focusing on pandemic has primarily focused on helping consumers make existing debt payments rather than focusing on
access to new credit during the pandemic. If consumers find it difficult to access credit markets, the resulting reduction in access to new credit during the pandemic. If consumers find it difficult to access credit markets, the resulting reduction in
consumer spending could harm the economic recovery. consumer spending could harm the economic recovery.

Congressional Research Service Congressional Research Service

COVID-19: Household Debt ~~during~~During the Pandemic

Introduction
The Coronavirus Disease 2019 (COVID-19) pandemic1 has had a large and persistent economic The Coronavirus Disease 2019 (COVID-19) pandemic1 has had a large and persistent economic
impact across the United States.2 Fear of infection, social distancing, and stay-at-home orders impact across the United States.2 Fear of infection, social distancing, and stay-at-home orders
prompted business closures and a severe decline in demand for travel, accommodations, prompted business closures and a severe decline in demand for travel, accommodations,
restaurants, and entertainment, among other industries. This led to a significant reduction in restaurants, and entertainment, among other industries. This led to a significant reduction in
employment and a loss of income in many U.S. households. However, consumers have employment and a loss of income in many U.S. households. However, consumers have ~~generally~~
~~not fallen~~general y not fal en delinquent on their loan obligations, such as mortgages, credit cards, auto loans, and delinquent on their loan obligations, such as mortgages, credit cards, auto loans, and
student loans. This pattern is unlike that of other economic recessions, such as the Great student loans. This pattern is unlike that of other economic recessions, such as the Great
Recession caused by the 2007-2009 financial crisis. Recession caused by the 2007-2009 financial crisis.
Many consumers having trouble paying their Many consumers having trouble paying their ~~bills~~bil s have received have received loan forbearance.3.3 Loan Loan
forbearance plans are agreements between borrowers and lenders that forbearance plans are agreements between borrowers and lenders that ~~allow~~al ow borrowers to reduce borrowers to reduce
or suspend payments for a short period of time, providing extended time for borrowers to become or suspend payments for a short period of time, providing extended time for borrowers to become
current on their payments and repay the amounts owed to the lenders. These plans do not forgive current on their payments and repay the amounts owed to the lenders. These plans do not forgive
unpaid loan payments and tend to be appropriate for borrowers experiencing temporary hardship.4 unpaid loan payments and tend to be appropriate for borrowers experiencing temporary hardship.4
In addition, many consumers who lost income received direct support from the government, In addition, many consumers who lost income received direct support from the government,
which may have helped them pay their which may have helped them pay their ~~bills.~~
bil s. Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented
many consumers from many consumers from ~~falling~~fal ing delinquent on their loans. delinquent on their loans. ~~Specifically~~Specifical y, the Coronavirus Aid, Relief, , the Coronavirus Aid, Relief,
and Economic Security (CARES) Act (P.L. 116-136), which was signed into law on March 27, and Economic Security (CARES) Act (P.L. 116-136), which was signed into law on March 27,
2020, granted forbearance for many types of mortgages (Section 4022) and for most federal 2020, granted forbearance for many types of mortgages (Section 4022) and for most federal
student loans (Section 3513).5 In addition to this legislativestudent loans (Section 3513).5 In addition to this legislative response, financial regulatory response, financial regulatory
agencies have responded to the COVID-19 pandemic using existing statutory authorities to agencies have responded to the COVID-19 pandemic using existing statutory authorities to
encourage loan forbearance and other financial relief options for affected consumers.6 Since the encourage loan forbearance and other financial relief options for affected consumers.6 Since the
COVID-19 pandemic began, many banks and credit unions have announced measures to offer COVID-19 pandemic began, many banks and credit unions have announced measures to offer
various forms of assistance to affected consumersvarious forms of assistance to affected consumers.

1 For background1 For background on the Coronavirus Diseaseon the Coronavirus Disease 2019 (COVID-19), see CRS2019 (COVID-19), see CRS In Focus IF11421, In Focus IF11421, COVID-19: Global
~~Implications~~Im plications and Responses, by Sara, by Sara ~~M. Tharakan~~ M. T harakan et al. et al.
2 For background 2 For background on the potential economic effects of the COVID-19 pandemic in the United States, see CRSon the potential economic effects of the COVID-19 pandemic in the United States, see CRS Insight Insight
IN11388, IN11388, COVID-19: U.S. ~~Economic~~Econom ic Effects, by Rena S., by Rena S. Miller and Marc Labonte. Miller and Marc Labonte.
3 For more information on consumer loan forbearance during the COVID-19 pandemic, including3 For more information on consumer loan forbearance during the COVID-19 pandemic, including ~~CARES~~ CARES Act rights to Act rights to
forbearance, regulatory guidance,forbearance, regulatory guidance, and impacts on consumers and financial institutions, seeand impacts on consumers and financial institutions, see ~~CRS~~ CRS Report R46356, Report R46356,
COVID ~~19: Consumer~~-19: Consum er Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper; and CRS , coordinated by Cheryl R. Cooper; and CRS
Insight IN11359, Insight IN11359, COVID-19: Financial Relief and Assistance Resources for ~~Consumers~~~~, by~~ Consum ers, by Maura MullinsMaura Mullins and and
Jennifer Jennifer ~~Teefy~~T eefy. .
4 Loan forbearance agreements between consumers and financial institutions usually include 4 Loan forbearance agreements between consumers and financial institutions usually include a repayment plan, which a repayment plan, which
is an agreement allowingis an agreement allowing a defaulteda defaulted borrower to repay borrower to repay ~~the~~t he amount in arrears and become current on the loan according amount in arrears and become current on the loan according
to an agreed-upon schedule.to an agreed-upon schedule. Repayment plans take many shapes. For example, these plans may includeRepayment plans take many shapes. For example, these plans may include a requirement a requirement
that all suspendedthat all suspended payments are to be duepayments are to be due at the end of the loan forbearance period; the past dueat the end of the loan forbearance period; the past due amount is to be addedamount is to be added
to the regular payment amount over the year after loan forbearance ends; or payments are to be addedto the regular payment amount over the year after loan forbearance ends; or payments are to be added to the end of the to the end of the
loan’s term. Interest or fees may or may not accrue duringloan’s term. Interest or fees may or may not accrue during the loan forbearance period.the loan forbearance period.
5 For a summary of CARES5 For a summary of CARES Act provisions aimed broadly at stabilizingAct provisions aimed broadly at stabilizing the economy and helping affected households the economy and helping affected households
and businesses,and businesses, see CRSsee CRS Report R46301, Report R46301, Title IV Provisions of the CARES Act (P.L. 116 -136), coordinated by Andrew , coordinated by Andrew
P. ScottP. Scott . .
6 Many financial regulatory agencies 6 Many financial regulatory agencies have updated their guidancehave updated their guidance to help financial firms support consumer needs to help financial firms support consumer needs
duringduring this time. Regulatory guidancethis time. Regulatory guidance ~~does~~ does not force financial institutions to take any particular action for consumers not force financial institutions to take any particular action for consumers
(such as offering loan forbearance), but it can encourage them to offer various forms of support.(such as offering loan forbearance), but it can encourage them to offer various forms of support.
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The CARES Act also provided fiscal relief, which was likely another important factor making it The CARES Act also provided fiscal relief, which was likely another important factor making it
easier for consumers to pay their existing loan obligations. These actions included direct income easier for consumers to pay their existing loan obligations. These actions included direct income
support in the form of enhanced unemployment insurance and relief checks phased out for higher-support in the form of enhanced unemployment insurance and relief checks phased out for higher-
income taxpayers (income taxpayers (~~called~~cal ed Economic Impact Payments), among other things.7 These income Economic Impact Payments), among other things.7 These income
transfer programs may have helped some consumers stay current on their consumer credit transfer programs may have helped some consumers stay current on their consumer credit
payments, particularly those who have lost income during the COVID-19 pandemic.payments, particularly those who have lost income during the COVID-19 pandemic.
This report explores household debt since the COVID-19 pandemic began. First, it describes the This report explores household debt since the COVID-19 pandemic began. First, it describes the
effects the pandemic has had on unemployment and income losses, effects the pandemic has had on unemployment and income losses, ~~followed~~fol owed by a discussion of by a discussion of
observed trends in household debt and delinquencies. Then, the report highlights two important observed trends in household debt and delinquencies. Then, the report highlights two important
policy impacts that influenced these trends: consumer loan forbearance and macroeconomic policy impacts that influenced these trends: consumer loan forbearance and macroeconomic
policy to support households during the economic recession. Lastly, the report discusses the policy to support households during the economic recession. Lastly, the report discusses the
uncertain outlook for household finances and consumer debt markets. uncertain outlook for household finances and consumer debt markets.
Household Income During the COVID-19 Pandemic
The spread of COVID-19 and the ensuing public health crisis resulted in a dramatic increase in The spread of COVID-19 and the ensuing public health crisis resulted in a dramatic increase in
unemployment, which peaked at 14.7% in Aprilunemployment, which peaked at 14.7% in April and has since and has since ~~fallen to 7.9% in September.8~~
fal en to 6.9% in October.8 These rates are the highest since the Great Depression and are worse than the peak unemployment These rates are the highest since the Great Depression and are worse than the peak unemployment
rate during the 2007-2009 Great Recession over a decade ago.9 Consequently, many Americans rate during the 2007-2009 Great Recession over a decade ago.9 Consequently, many Americans
have have lost income and faced financial hardship due to the impact of the pandemic.10lost income and faced financial hardship due to the impact of the pandemic.10
Survey results suggest that since March 2020, Survey results suggest that since March 2020, about half of half of ~~all~~ al adults live in a household that has lost adults live in a household that has lost
some employment income.some employment income.1111 Figure 1 shows shows ~~select~~selected results from the Federal Reserve Bank of results from the Federal Reserve Bank of
Philadelphia’s COVID-19 Survey of Consumers, an online survey conducted to gather Philadelphia’s COVID-19 Survey of Consumers, an online survey conducted to gather
information from respondents about income, employment, and financial security during the information from respondents about income, employment, and financial security during the
COVID-19 pandemic. So far, the survey has been administered in COVID-19 pandemic. So far, the survey has been administered in ~~four~~five waves during April, May, waves during April, May,
JuneJune, July, and , and ~~July~~September 2020. In the first wave of the survey, conducted in April, 39. 2020. In the first wave of the survey, conducted in April, 39.2 1% of respondents % of respondents
indicated a reduction in personal income, or no income, as a result of the pandemic.12 Waves 2, 3, indicated a reduction in personal income, or no income, as a result of the pandemic.12 Waves 2, 3,
4, and and 45 saw some improvements to personal income loss as the percentage of saw some improvements to personal income loss as the percentage of ~~respondents reporting~~

7 For more information on the direct payments to individuals in the CARES7 For more information on the direct payments to individuals in the CARES Act, seeAct, see ~~CRS~~ CRS Insight IN11282, Insight IN11282, COVID-19
and Direct ~~Payments~~Paym ents to Individuals: ~~Summary~~Sum m ary of the 2020 Recovery Rebates/~~Economic~~Econom ic Impact Payments in the CARES
Act (P.L. 116-136), by Margot L. Crandall-Hollick. , by Margot L. Crandall-Hollick.
8 Bureau 8 Bureau of Labor Statistics, of Labor Statistics, The Employment Situation—~~September~~October 2020, , ~~October 2~~November 6, 2020, at https://www.bls.gov/, 2020, at https://www.bls.gov/
news.release/pdf/empsit.pdf. For more backgroundnews.release/pdf/empsit.pdf. For more background on how unemployment is calculated and other related economic on how unemployment is calculated and other related economic
concepts, see CRSconcepts, see CRS In FocusIn Focus IF10443, IF10443, Introduction to U.S. ~~Economy: Unemployment~~Econom y: Unem ployment, by Lida R. Weinstock. , by Lida R. Weinstock.
9 9 ~~The~~T he official unemployment rates are possibly underestimates as well—the Bureau official unemployment rates are possibly underestimates as well—the Bureau of Labor Statistics reported a likely of Labor Statistics reported a likely
error in how respondents classifiederror in how respondents classified ~~being~~ being furloughed.furloughed. For more, see CRSFor more, see CRS Insight IN11456, Insight IN11456, COVID-19: Measuring
~~Unemployment~~Unem ploym ent, by Lida R. Weinstock. , by Lida R. Weinstock.
10 For more information on financial industry policy issues 10 For more information on financial industry policy issues ~~during~~ during the COVID-19 pandemic for consumers having the COVID-19 pandemic for consumers having
trouble paying their bills,trouble paying their bills, see CRSsee CRS Insight IN11244, Insight IN11244, COVID-19: The Financial Industry and ~~Consumers~~Consum ers Struggling to
Pay Bills,, by Cheryl R. Cooper. by Cheryl R. Cooper.
11 For more information on income losses during11 For more information on income losses during the COVID-19 pandemic, see CRSthe COVID-19 pandemic, see CRS Insight IN11457, Insight IN11457, COVID-19
Pandemic’s Impact on Household Employment and Income, by Gene Falk. , by Gene Falk.
12 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, 12 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
~~Consumers—Wave 4 Tracks How the Vulnerable Are Affected More by Job Interruptions and Income Disruptions~~Consum ers—Wave 5 Supplies More Details on Disruptions and New Data on Savings, at , at
https://www.philadelphiafed.org/https://www.philadelphiafed.org/~~-/media/covid/cfi~~consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-/cfi-covid-19-survey-of-consumers-~~wave4-updates.pdf, see Table~~
wave-5-updates, see T able 4—Impact to personal Income (hereinafter Federal Reserve Bank of Philadelphia, “4—Impact to personal Income (hereinafter Federal Reserve Bank of Philadelphia, “ COVID-19 COVID-19 ~~Survey~~ Survey of Consumers—of Consumers—
Wave Wave 45” 2020, see ” 2020, see ~~Table~~T able 4). 4).
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COVID-19: Household Debt ~~during~~During the Pandemic

respondents reporting a reduction in personal income, or no income, decreased to 35.8%, 32.7%, a reduction in personal income, or no income, decreased to 35.8%, 32.7%, and 32.1%, and 32.1%,
and 31.7%, respectively.13 respectively.13
This loss of income may be a large unexpected financial event for many families, and research This loss of income may be a large unexpected financial event for many families, and research
suggests that many families may not have much emergency savings. For example, a 2019 Federal suggests that many families may not have much emergency savings. For example, a 2019 Federal
Reserve survey, before the COVID-19 pandemic, found that 37% of families reported not being Reserve survey, before the COVID-19 pandemic, found that 37% of families reported not being
able to cover a $400 emergency expense with savings or the equivalent.14 Therefore, this able to cover a $400 emergency expense with savings or the equivalent.14 Therefore, this
employment income loss has led some Americans to feel more insecure about their financial employment income loss has led some Americans to feel more insecure about their financial
situation. When asked how the COVID-19 crisis affected their concern about their ability to make situation. When asked how the COVID-19 crisis affected their concern about their ability to make
ends meet over the next 12 months, 27.ends meet over the next 12 months, 27.87% of respondents in April indicated feeling significantly % of respondents in April indicated feeling significantly
less secure than they did prior to the crisis; seless secure than they did prior to the crisis; see Figure 1.15 Responses to this question about 15 Responses to this question about
financial security showed improvement in subsequent waves. The percentage of respondents financial security showed improvement in subsequent waves. The percentage of respondents
reporting significant concern about their ability to make ends meet over the next 12 months reporting significant concern about their ability to make ends meet over the next 12 months
decreased from 20.4% in May down to 14.6% in June. However, this percentage increased to decreased from 20.4% in May down to 14.6% in June. However, this percentage increased to
15.6% in July, indicating a slight reversal in the downward trend and an increased concern among 15.6% in July, indicating a slight reversal in the downward trend and an increased concern among
respondents about their ability to make ends meet in the next 12 months.respondents about their ability to make ends meet in the next 12 months. This percentage decreased slightly to 14.4% in September.16 16
Figure 1. Percentage of Households Reporting Lost Income and Significantly Less
Financial Security Since COVID-19 Crisis
April, May, June April, May, June, July, and , and ~~July~~September 2020 2020

Source: FederalFederal ~~Reserve~~ Reserve Bank of Philadelphia, Consumer Finance Institute’s Special Report, COVID-19 Survey Bank of Philadelphia, Consumer Finance Institute’s Special Report, COVID-19 Survey
of Consumers—Waveof Consumers—Wave 4 5, at https://www.philadelphiafed.org/, at https://www.philadelphiafed.org/~~-/media/covid/cfi~~consumer-finance/consumer-credit/cfi-covid-19-/cfi-covid-19-survey-of-consumers-wave-5-updates. 13 Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers—Wave 5” 2020, see T able~~survey-of-consumers-~~
~~wave4-updates.pdf.~~
Notes: Data from Waves 1, 2, and 3 of the Consumer Finance Institute’s Special Report, COVID-19 Survey of
~~Consumers are available at https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-survey-of-~~
~~consumers.pdf, https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave2-~~

~~13 Federal Reserve Bank of Philadelphia, “COVID-19 Survey of Consumers—Wave 4” 2020, see Table~~ 4. 4.
14 Board of Governors of the Federal Reserve, 14 Board of Governors of the Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2019,
Featuring ~~Supplemental~~Supplem ental Data from April 2020 , May 2020, pp. 2-3, at https://www.federalreserve.gov/publications/, May 2020, pp. 2-3, at https://www.federalreserve.gov/publications/
files/2019-reportfiles/2019-report -economic-well-being-us-households-202005.pdf. -economic-well-being-us-households-202005.pdf.
15 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, 15 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
~~Consumers—Wave 4 Tracks How the Vulnerable Are Affected More by Job Interruptions and Income Disruptions~~Consum ers—Wave 5 Supplies More Details on Disruptions and New Data on Savings, at , at
https://www.philadelphiafed.org/https://www.philadelphiafed.org/~~-/media/covid/cfi~~consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-/cfi-covid-19-survey-of-consumers-~~wave4-updates.pdf, see Table~~
5wave-5-updates, see T able 6—Financial Security and Outlook (hereinafter Federal Reserve Bank of Philadelphia, “—Financial Security and Outlook (hereinafter Federal Reserve Bank of Philadelphia, “ COVID-19 COVID-19 ~~Survey of~~
Survey of Consumers—Wave Consumers—Wave 45” 2020, see ” 2020, see ~~Table 5).~~
T able 6). 16 Federal Reserve Bank of Philadelphia, “16 Federal Reserve Bank of Philadelphia, “ COVID-19 SurveyCOVID-19 Survey of Consumers—Wave of Consumers—Wave 45” 2020, see ” 2020, see ~~Table 5~~T able 6. .
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~~updates.pdf, and https://www.philadelphiafed.org/-/media/covid/cfi~~Notes: Data from Waves 1, 2, 3, and 4 of the Consumer Finance Institute’s Special Report, COVID-19 Survey of Consumers, are available at https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers, https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-wave2-updates, https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-/cfi-covid-19-survey-of-consumers-~~wave3-~~
~~updates.pdf~~wave-3-updates, and https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-wave-4-updates, respectively. , respectively.
The income loss from the COVID-19 pandemic may impact the ability of some families to pay The income loss from the COVID-19 pandemic may impact the ability of some families to pay
their loan obligations or other their loan obligations or other ~~bills~~bil s. Late loan payments can harm an individual’s credit score, . Late loan payments can harm an individual’s credit score,
which could reduce their access to credit in the future. Severe delinquency can also which could reduce their access to credit in the future. Severe delinquency can also ~~eventually~~eventual y
lead to more serious consequences, such as debt collection, foreclosure, car repossession, or wage lead to more serious consequences, such as debt collection, foreclosure, car repossession, or wage
garnishment. For this reason, many policymakers are interested in understanding the impact of garnishment. For this reason, many policymakers are interested in understanding the impact of
COVID-19 pandemic income losses on household debt and delinquency. COVID-19 pandemic income losses on household debt and delinquency.
Household Debt and Delinquency Trends
As of the As of the ~~second~~third quarter of 2020, household debt totaled $14. quarter of 2020, household debt totaled $14.~~3 trillion~~4 tril ion.17 By far, the largest type .17 By far, the largest type
of household debt was mortgage debt at $9.of household debt was mortgage debt at $9.~~8 trillion~~9 tril ion.18 The second largest type of debt was .18 The second largest type of debt was
student loan debt totaling $1.student loan debt totaling $1.~~5 trillion~~6 tril ion, followed by auto loan debt at $1., followed by auto loan debt at $1.~~3 trillion~~4 tril ion, and credit card , and credit card
debt at debt at ~~$817 billion.19~~ $807 bil ion.19 Figure 2 shows total household debt and its composition since 2006 using shows total household debt and its composition since 2006 using
data from the Federal Reserve Bank of New York. It highlights household debt levels during the data from the Federal Reserve Bank of New York. It highlights household debt levels during the
two most recent recessions, the Great Recession that began in late 2007 as a result of the 2007-two most recent recessions, the Great Recession that began in late 2007 as a result of the 2007-
2009 financial crisis and the current recession that began in early 2020 with the COVID-19 2009 financial crisis and the current recession that began in early 2020 with the COVID-19
pandemic. After peaking in 2008, total household debt pandemic. After peaking in 2008, total household debt ~~gradually~~gradual y decreased over a period of decreased over a period of
nearly five years nearly five years until the middle of 2013, at which time household debt began increasing again. until the middle of 2013, at which time household debt began increasing again.

17 Federal Reserve Bank of New17 Federal Reserve Bank of New York, York, Household Debt and Credit (Based on New York Fed Consumer Credit Panel) , ,
Center for Microeconomic Data, Center for Microeconomic Data, Q2Q3 2020, at https://www.newyorkfed.org/microeconomics/hhdc/background.html 2020, at https://www.newyorkfed.org/microeconomics/hhdc/background.html
(hereinafter Federal Reserve Bank of New(hereinafter Federal Reserve Bank of New York, York, Household Debt and Credit, , Q2Q3 2020). For an overview of consumer 2020). For an overview of consumer
financial markets, see CRSfinancial markets, see CRS Report R45813, Report R45813, An Overview of ~~Consumer~~Consum er Finance and Policy Issues, by Cheryl R. , by Cheryl R.
Cooper. Cooper.
18 Federal Reserve Bank of New 18 Federal Reserve Bank of New York, York, Household Debt and Credit, , Q2Q3 2020. 2020.
19 Federal Reserve Bank of New19 Federal Reserve Bank of New York, York, Household Debt and Credit, , Q2Q3 2020. 2020.
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Figure 2. Total Household Debt and Its Composition
1st Quarter 2006 – 1st Quarter 2006 – ~~2nd~~3rd Quarter 2020 Quarter 2020

Source: New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/
background.html. background.html.
Notes: The data are inflation-adjusted to The data are inflation-adjusted to ~~2020Q2~~2020Q3 dol ars. HE revolving dol ars. HE revolving debt refersdebt refers to home equity lending. to home equity lending.
Economic recessionsEconomic recessions are shaded in the graph. are shaded in the graph.
Although the current level of debt is close to its 2008 peak, the composition of household debt Although the current level of debt is close to its 2008 peak, the composition of household debt
has changed in the past decade. In 2008, mortgage debt (including home equity debt) was a much has changed in the past decade. In 2008, mortgage debt (including home equity debt) was a much
larger proportion of household debt than it is now. Since the last recession, student loan debt has larger proportion of household debt than it is now. Since the last recession, student loan debt has
doubled and auto loan debt has also grown. doubled and auto loan debt has also grown.
~~As of~~During the second the second ~~quarter~~and third quarters of 2020, the pandemic had affected different types of aggregate of 2020, the pandemic had affected different types of aggregate
household debt balances differently. Notably, credit card balances declined sharply household debt balances differently. Notably, credit card balances declined sharply during the second quarter by about $76 by about $76
~~billion~~bil ion, the largest quarterly decline on record.20 By , the largest quarterly decline on record.20 By contrast, there were contrast, there were ~~slight~~ increases in increases in
mortgage debt balances, but other household debt balances remained relatively flat in the second mortgage debt balances, but other household debt balances remained relatively flat in the second
~~quarter~~and third quarters of 2020.21 These effects surprised some observers who thought that credit card debt would of 2020.21 These effects surprised some observers who thought that credit card debt would
increase during the quarter due to lost income from the COVID-19 pandemic.22 The Consumer increase during the quarter due to lost income from the COVID-19 pandemic.22 The Consumer
Financial Protection Bureau (CFPB) finds credit card balance declines “across Financial Protection Bureau (CFPB) finds credit card balance declines “across ~~all~~ al groups, groups,
including consumers residing in both high- and low-including consumers residing in both high- and low- income census tracts,” possibly due to a income census tracts,” possibly due to a
decline in consumer spending.decline in consumer spending.~~23Despite many Americans losing income, consumers have~~

23 Despite many 20 Federal Reserve Bank of New20 Federal Reserve Bank of New York, York, Household Debt and Credit, , Q2Q3 2020. 2020.
21 Andrew21 Andrew F. HaughwoutF. Haughwout et al., et al., A Monthly Peek into Americans’ Credit During the COVID-19 Pandemic, Federal , Federal
Reserve Bank of NewReserve Bank of New York, Liberty Street Economics, August 6, 2020, at York, Liberty Street Economics, August 6, 2020, at
https://libertystreeteconomics.newyorkfed.org/2020/08/a-monthly-peek-into-americans-credit-during-the-covid-19-https://libertystreeteconomics.newyorkfed.org/2020/08/a-monthly-peek-into-americans-credit-during-the-covid-19-
pandemic.html. pandemic.html.
22 Jeanna Smialek, 22 Jeanna Smialek, “Credit Card Debt Plunges, Driving a Decline in Overall Household Debt,”“Credit Card Debt Plunges, Driving a Decline in Overall Household Debt,” New York Times, ,
AugustAugust 6, 2020. 6, 2020.
23 Ryan Sandler23 Ryan Sandler and Judith Ricks, and Judith Ricks, The Early Effects of the COVID-19 Pandemic on Consumer Credit, Consumer , Consumer
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COVID-19: Household Debt ~~during~~During the Pandemic

~~generally not fallen~~Americans losing income, consumers have general y not fal en delinquent on their loan obligations. This pattern is unlike delinquent on their loan obligations. This pattern is unlike during other during other
economic recessions, such as the 2007-2009 Great Recession. In the second economic recessions, such as the 2007-2009 Great Recession. In the second ~~quarter~~and third quarters of 2020, the of 2020, the
percentage of delinquent loans declined in most consumer debt percentage of delinquent loans declined in most consumer debt ~~market~~smarkets. Figure 3 shows the shows the
percentage of delinquent loans that are 30 or more days late, by loan type, on a quarterly basis percentage of delinquent loans that are 30 or more days late, by loan type, on a quarterly basis
between the first quarter of 2006 and the most recent quarter of 2020. Whereas delinquency between the first quarter of 2006 and the most recent quarter of 2020. Whereas delinquency
increased during the Great Recession, a similar increased during the Great Recession, a similar pattern is not observed during the COVID-19 pattern is not observed during the COVID-19
pandemic. Student loans experienced the largest decrease in delinquency during the second pandemic. Student loans experienced the largest decrease in delinquency during the second
quarter of 2020, and delinquency rates for most other types of consumer debt also notably quarter of 2020, and delinquency rates for most other types of consumer debt also notably ~~fell.~~
fel . Some of this decline is due to consumers entering into Some of this decline is due to consumers entering into loan forbearance agreements (discussed in loan forbearance agreements (discussed in
the next section).the next section).
Figure 3. Percentage of Delinquent Loans (30+ Days Late) by Loan Type:
1st Quarter 2006 – 1st Quarter 2006 – ~~2nd~~3rd Quarter 2020 Quarter 2020

Source: New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/
background.html. background.html.
Notes: HE revolving debt refers HE revolving debt refers to home equity lending. Economic recessionsto home equity lending. Economic recessions are shaded in the graph. are shaded in the graph.
Consumer Loan Forbearance Trends
Many consumers who would likely have experienced difficulty repaying their loans received Many consumers who would likely have experienced difficulty repaying their loans received loan
forbearance.24.24 Loan forbearance plans can prevent a consumer from becoming delinquent, giving Loan forbearance plans can prevent a consumer from becoming delinquent, giving
the consumer time to repay the debts owed rather than the consumer time to repay the debts owed rather than ~~potentially~~potential y experiencing adverse experiencing adverse

consequences, such as credit score declines, debt collection, or foreclosure. As previously Financial Protection Bureau (CFPB), CFPB Office of Research SpecialFinancial Protection Bureau (CFPB), CFPB Office of Research Special ~~Issue~~ Issue Brief, AugustBrief, August 2020, p. 3, at 2020, p. 3, at
https://www.consumerfinance.gov/data-research/research-reports/special-issue-brief-early-effects-covid-19-pandemic-https://www.consumerfinance.gov/data-research/research-reports/special-issue-brief-early-effects-covid-19-pandemic-
on-consumer-credit/ (hereinafter Ryan Sandler and Judith Ricks,on-consumer-credit/ (hereinafter Ryan Sandler and Judith Ricks, Household Debt and Credit, August, August 2020). 2020).
24 For more information on consumer loan forbearance during the COVID-19 pandemic, including 24 For more information on consumer loan forbearance during the COVID-19 pandemic, including ~~CARES~~ CARES Act rights Act rights
to forbearance, regulatory guidance,to forbearance, regulatory guidance, and impacts on consumers and financial institutions, seeand impacts on consumers and financial institutions, see ~~CRS~~ CRS Report R46356, Report R46356,
COVID ~~19: Consumer~~-19: Consum er Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper; and CRS , coordinated by Cheryl R. Cooper; and CRS
Insight IN11359, Insight IN11359, COVID-19: Financial Relief and Assistance Resources for ~~Consumers~~~~, by~~ Consum ers, by Maura MullinsMaura Mullins and and
Jennifer Jennifer ~~Teefy~~T eefy. .
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link to page 11 link to page 11 COVID-19: Household Debt ~~during the Pandemic~~

~~consequences, such as credit score declines, debt collection, or foreclosure. As previously~~
During the Pandemic mentioned, the CARES Act established consumer rights to be granted forbearance for mentioned, the CARES Act established consumer rights to be granted forbearance for ~~federally~~federal y
backed mortgages and for most federal student loans during the COVID-19 pandemic. In backed mortgages and for most federal student loans during the COVID-19 pandemic. In
addition, many financial institutions voluntarily offered loan forbearance and other financial relief addition, many financial institutions voluntarily offered loan forbearance and other financial relief
options for affected consumers having trouble paying other types of loan obligations, such as auto options for affected consumers having trouble paying other types of loan obligations, such as auto
loans, credit cards, private student loans, and bank-owned mortgages. The CARES Act’s loans, credit cards, private student loans, and bank-owned mortgages. The CARES Act’s
consumer protections and financial institutions’ loan forbearance programs arguably helped avoid consumer protections and financial institutions’ loan forbearance programs arguably helped avoid
sharp increases in loan delinquencies by making it possible for many loans to receive forbearance sharp increases in loan delinquencies by making it possible for many loans to receive forbearance
during the spring and summer of 2020. Loans in forbearance are not classified as delinquent, during the spring and summer of 2020. Loans in forbearance are not classified as delinquent,
although they may be driven by similar underlying circumstances for the borrower. although they may be driven by similar underlying circumstances for the borrower.
According to the Federal Reserve Bank of Philadelphia’s COVID-19 Survey of Consumers in According to the Federal Reserve Bank of Philadelphia’s COVID-19 Survey of Consumers in
April 2020, 18.0% of respondents reported requesting a deferral or reduced payments on April 2020, 18.0% of respondents reported requesting a deferral or reduced payments on
mortgages, rents, or utilities, 18.1% of respondents reported requesting a deferral on a non-mortgages, rents, or utilities, 18.1% of respondents reported requesting a deferral on a non-
mortgage debt, and 14.0% reported seeking a new loan due to the impacts of the COVID-19 mortgage debt, and 14.0% reported seeking a new loan due to the impacts of the COVID-19
crisis.25 Not crisis.25 Not ~~all~~ al of these consumers reported receiving the financial assistance they requested; of these consumers reported receiving the financial assistance they requested;
about a quarter of respondents reported not receiving a requested deferral.26 about a quarter of respondents reported not receiving a requested deferral.26
The percentage of respondents reporting seeking financial assistance rose slightly between April and September 2020 in most categories, including those who have requested payment deferrals.27 Many mortgage borrowers entered loan forbearance at the beginning of the COVID-19 pandemic. Many mortgage borrowers entered loan forbearance at the beginning of the COVID-19 pandemic.
According to Mortgage Bankers Association’s (MBA’s) Forbearance and According to Mortgage Bankers Association’s (MBA’s) Forbearance and ~~Call~~ Cal Volume Survey, Volume Survey,
the percentage of single-family mortgage loans estimated to be in forbearance as of the beginning the percentage of single-family mortgage loans estimated to be in forbearance as of the beginning
of of ~~September was 7.0%.27~~November was 5.47%.28 Before the pandemic, the proportion of mortgage loans in forbearance Before the pandemic, the proportion of mortgage loans in forbearance
was relatively was relatively ~~small~~smal . According to the MBA,. According to the MBA, the total share of loans in forbearance increased the total share of loans in forbearance increased
from 0.25% to 2.66% between March 2 and April 1, 2020.from 0.25% to 2.66% between March 2 and April 1, 2020.2829 At the beginning of April, following At the beginning of April, following
the passage of the CARES Act, MBA initiatedthe passage of the CARES Act, MBA initiated a weekly survey of forbearance and a weekly survey of forbearance and ~~call~~ cal reporting. reporting.
Figure 4 shows the share of mortgage loans in forbearance each week starting in early April shows the share of mortgage loans in forbearance each week starting in early April
through the through the ~~end of September~~beginning of November. The reported percentage of mortgages in forbearance increased in . The reported percentage of mortgages in forbearance increased in
April and May, reaching a high of 8.55% as of June 7, 2020.April and May, reaching a high of 8.55% as of June 7, 2020.2930 Since mid-June, the Since mid-June, the share of share of
mortgage loans in forbearance has mortgage loans in forbearance has ~~generally~~general y decreased each week, although it remains decreased each week, although it remains much much
higher than before the pandemic. higher than before the pandemic.

25 Federal Reserve Bank of Philadelphia, “25 Federal Reserve Bank of Philadelphia, “ COVID-19 SurveyCOVID-19 Survey of Consumers,”of Consumers,” Consumer Finance Institute’s Special Consumer Finance Institute’s Special
Report, May 2020, pp. 8, 20, atReport, May 2020, pp. 8, 20, at https://www.philadelphiafed.org/https://www.philadelphiafed.org/~~-/media/covid/cfi~~consumer-finance/consumer-credit/cfi-covid-19-survey-of-/cfi-covid-19-survey-of-
~~consumers.pdf~~consumers (hereinafter Federal Reserve Bank of Philadelphia, “ (hereinafter Federal Reserve Bank of Philadelphia, “ COVID-19 Survey of Consumers,” 2020). COVID-19 Survey of Consumers,” 2020).
26 Federal Reserve Bank of Philadelphia, “ 26 Federal Reserve Bank of Philadelphia, “ COVID-19 SurveyCOVID-19 Survey of Consumers,”of Consumers,” ~~2020, p. 20.~~
27 2020, p. 20. 27 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of Consum ers—Wave 5 Supplies More Details on Disruptions and New Data on Savings, at https://www.philadelphiafed.org/consumer-finance/consumer-credit/cfi-covid-19-survey-of-consumers-wave-5-updates, see T able 8—Financial Assistance Sought. 28 Mortgage Bankers Association (MBA), “Share of Mortgage Loans in Forbearance Declines to Mortgage Bankers Association (MBA), “Share of Mortgage Loans in Forbearance Declines to ~~7.01~~5.47%,” press release, %,” press release,
~~September 14~~November 16, 2020, at https://www.mba.org/2020-press-releases/, 2020, at https://www.mba.org/2020-press-releases/~~september~~november/share-of-mortgage-loans-in-forbearance-/share-of-mortgage-loans-in-forbearance-
~~declines-to-701.~~
28decreases-to-547-percent. 29 MBA, “MBA Survey Shows MBA, “MBA Survey Shows Spike in Loans in Forbearance, Servicer CallSpike in Loans in Forbearance, Servicer Call Volume,”Volume,” press release, April 7, 2020, at press release, April 7, 2020, at
https://www.mba.org/2020-press-releases/april/mba-survey-shows-spike-in-loans-in-forbearance-servicer-call-volume. https://www.mba.org/2020-press-releases/april/mba-survey-shows-spike-in-loans-in-forbearance-servicer-call-volume.
2930 MBA, “Share of Mortgage Loans in Forbearance Increases to 8.55%,” press release, June MBA, “Share of Mortgage Loans in Forbearance Increases to 8.55%,” press release, June 15, 2020, at 15, 2020, at
https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855. https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855.
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Figure 4. Weekly Share of Mortgage Loans in Forbearance
April April ~~– September~~-November 2020 2020

Source: Mortgage BankersMortgage Bankers Association’sAssociation’s (MBA) Weekly(MBA) Weekly Forbearance and Forbearance and ~~Call~~ Cal Volume Survey. See also MBA’s Volume Survey. See also MBA’s
press releasespress releases for survey highlights, at https://www.mba.org/search/press-release-for survey highlights, at https://www.mba.org/search/press-release-~~search?keywords=forbearance~~sea rch?keywords=forbea rance&&
start=0&rows=10.start=0&rows=10.
Notes: MBA’s weekly MBA’s weekly survey covers moresurvey covers more than three quarters of first-lien mortgages. than three quarters of first-lien mortgages.
Forbearance increased not only for mortgage loans but for other consumer credit products as Forbearance increased not only for mortgage loans but for other consumer credit products as ~~well.~~
wel. The Trump Administration has set the federal student loan interest rate to zero, and borrowers The Trump Administration has set the federal student loan interest rate to zero, and borrowers ~~will~~
wil not be required to make payments due on their loans through the end of 2020, effectively putting not be required to make payments due on their loans through the end of 2020, effectively putting
~~all~~ al of these loans of these loans ~~automatically~~automatical y in forbearance. in forbearance.3031 Loan forbearance also rose in auto loan and Loan forbearance also rose in auto loan and
credit card markets, where consumers do not have a right in the CARES Act to forbearance. credit card markets, where consumers do not have a right in the CARES Act to forbearance.
However, many lenders may However, many lenders may ~~still~~ stil offer it as an option to consumers. According to the CFPB, auto offer it as an option to consumers. According to the CFPB, auto
loans in forbearance increased from about 1.5% in February 2020 to about 3% in June 2020, and loans in forbearance increased from about 1.5% in February 2020 to about 3% in June 2020, and
credit card loans in forbearance increased from about 1.5% in February 2020 to about 3.5% in credit card loans in forbearance increased from about 1.5% in February 2020 to about 3.5% in
June 2020.June 2020.3132 In addition, payment assistance was “more likely to be reported for borrowers In addition, payment assistance was “more likely to be reported for borrowers

30 31 Section 3513 of the CARES Section 3513 of the CARES Act suspendsAct suspends all payments due and interest accrual for all loans made under the Direct all payments due and interest accrual for all loans made under the Direct
Loan program and the Federal Family Education Loan program held by the Department of Education through Loan program and the Federal Family Education Loan program held by the Department of Education through
September 30, 2020. On AugustSeptember 30, 2020. On August 8, 2020, President 8, 2020, President ~~Trump~~T rump directed the Department of Education to extend the “ directed the Department of Education to extend the “ waiver waiver
of all interest” on federally held student loans through December 31, 2020. For more information about federal student of all interest” on federally held student loans through December 31, 2020. For more information about federal student
loan debt relief in the context of COVID-19, see CRSloan debt relief in the context of COVID-19, see CRS Report R46314, Report R46314, Federal Student Loan Debt Relief in the Context
of COVID-19, by Alexandra Hegji. , by Alexandra Hegji.
~~31 The~~32 T he CFPB calculates CFPB calculates payment assistance “as an account being reported with a zero scheduledpayment assistance “as an account being reported with a zero scheduled ~~payment~~ paym ent due despite a due despite a
positive balance.” positive balance.” ~~The~~T he CFPB notes that “the variation in the incidence of consumer assistance reported ... may have as CFPB notes that “the variation in the incidence of consumer assistance reported ... may have as
much to do with how furnishers in each market report to the [credit bureaus] asmuch to do with how furnishers in each market report to the [credit bureaus] as it does with the incidence of actual it does with the incidence of actual
assistance.” Ryan Sandlerassistance.” Ryan Sandler and Judith Ricks,and Judith Ricks, Household Debt and Credit, August, August 2020, pp. 13-15. Other sources 2020, pp. 13-15. Other sources
calculate estimates differently than the CFPB, and report different percentages. For example, calculate estimates differently than the CFPB, and report different percentages. For example, ~~Transunion~~T ransunion creates a creates a
broader metric called “accounts in hardship,” whichbroader metric called “accounts in hardship,” which ~~includes~~ includes loans “affected by natural/declared disaster, accounts loans “affected by natural/declared disaster, accounts
reported as in forbearance, accounts reported as deferredreported as in forbearance, accounts reported as deferred or payment due amount removal, or freezing of account status or payment due amount removal, or freezing of account status
and/or past dueand/or past due amount.” amount.” ~~Transunion~~T ransunion reports 7.2% of reports 7.2% of ~~auto~~aut o accounts and 3.6% of credit card loans in hardship in June accounts and 3.6% of credit card loans in hardship in June
2020. See 2020. See ~~Transunion~~T ransunion, , Monthly Industry Snapshot: Financial Services, at https://www.transunion.com/monthly-, at https://www.transunion.com/monthly-
industry-snapshot-fs. industry-snapshot-fs.
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residing in areas with more COVID-19 cases, with majority-Black or majority-Hispanic residing in areas with more COVID-19 cases, with majority-Black or majority-Hispanic
populations, and with larger changes in unemployment since the start of the pandemic.”populations, and with larger changes in unemployment since the start of the pandemic.”3233
Household Debt Trends: Current Recession Compared with the Great Recession
The current recession The current recession created by the COVID-19 pandemic differs fromcreated by the COVID-19 pandemic differs from the Great Recessionthe Great Recession caused by the 2007-caused by the 2007-
2009 financial crisis.2009 financial crisis. Although the pandemic has caused lost income and financial insecurity,Although the pandemic has caused lost income and financial insecurity, mortgage borrowers’ mortgage borrowers’
household finances werehousehold finances were ~~generally~~ general y stronger in light of stricter stronger in light of stricter lending standards over the last severallending standards over the last several years.years.3334 For For
example,example, ~~families~~ families have lesshave less mortgage debt and more equity in their homes.mortgage debt and more equity in their homes. During the Great Recession,During the Great Recession, many many
familiesfamilies lost equity in their homeslost equity in their homes resulting from low- or zero-down payment requirementsresulting from low- or zero-down payment requirements ~~and falling~~ and fal ing home home
values. According to the Case-Shil ervalues. According to the Case-Shil er U.S. National HomeU.S. National Home Price Index, home prices acrossPrice Index, home prices across the United States the United States ~~fell~~
fel moremore than 25% on average between the peak and the bottom of the housing bubble.than 25% on average between the peak and the bottom of the housing bubble.3435 This led to many This led to many
foreclosures,foreclosures, which destabilized local house priceswhich destabilized local house prices and harmed local communities.and harmed local communities. In contrast, house prices have In contrast, house prices have
not not ~~fallen~~fal en during the COVID-19 pandemic. during the COVID-19 pandemic.3536
Loan forbearance may be a moreLoan forbearance may be a more viable solution for familiesviable solution for families having trouble paying their mortgageshaving trouble paying their mortgages during the during the
COVID-19 pandemic than during the Great Recession,COVID-19 pandemic than during the Great Recession, because familiesbecause families have equity in their homes.have equity in their homes. According to According to
Black Knight estimates,Black Knight estimates, only 9% of borrowersonly 9% of borrowers in forbearance have lessin forbearance have less than 10% of equity in their homes,than 10% of equity in their homes, and and
almost 80% have at least 20% equity in their homes, suggesting that relativelyalmost 80% have at least 20% equity in their homes, suggesting that relatively few mortgage borrowersfew mortgage borrowers may be at may be at
riskrisk for foreclosurefor foreclosure at the moment.at the moment.~~36 Borrowers~~ 37 Borrowers with equity in their homeswith equity in their homes can avoid foreclosurecan avoid foreclosure through loan through loan
forbearances, mortgage refinancing, or if no longer affordable, forbearances, mortgage refinancing, or if no longer affordable, ~~selling~~ sel ing the home; borrowersthe home; borrowers with negative equity with negative equity
may not have these options.may not have these options.3738 During the Great Recession, During the Great Recession, by contrast, by contrast, ~~falling home~~ fal ing home prices meant that many prices meant that many
familiesfamilies had negative equity, and thereforehad negative equity, and therefore ~~were more at risk~~ were more at risk of foreclosure.of foreclosure.38
39 Student and auto loan debt, however,Student and auto loan debt, however, are higher now for most households than during the Great Recession.are higher now for most households than during the Great Recession. The The
federal government owns most student loan debt in the United States, and these loans have been effectivelyfederal government owns most student loan debt in the United States, and these loans have been effectively in in
loan forbearance during the pandemic, thus consumersloan forbearance during the pandemic, thus consumers have been able to choose not to pay on them. Car loans have been able to choose not to pay on them. Car loans
may also be vulnerable to becoming delinquent in the future. In recent years as auto lending has grown, some may also be vulnerable to becoming delinquent in the future. In recent years as auto lending has grown, some
loans were made to subprime consumersloans were made to subprime consumers who may be more likelywho may be more likely to have trouble paying these loans back due to to have trouble paying these loans back due to
the economic downturn.the economic downturn.3940 However, However, ~~increased~~ increased demand for used vehicles during the COVID-19 pandemic may demand for used vehicles during the COVID-19 pandemic may
limitlimit potential credit lossespotential credit losses in this market,in this market, ~~by allowing some consumers~~ by al owing some consumers the option to the option to ~~sell~~ sel their cars rather than their cars rather than
becoming delinquent on their auto loans.becoming delinquent on their auto loans.40

~~32 Ryan Sandler~~ 41 33 Ryan Sandler and Judith Ricks, and Judith Ricks, Household Debt and Credit, August, August 2020, p. 3. 2020, p. 3.
~~33 See CRS~~ 34 See CRS InFocus CRSInFocus CRS In FocusIn Focus IF11413, IF11413, The Qualified Mortgage (QM) Rule and the QM Patch, by Darryl E. , by Darryl E.
Getter. Getter.
3435 S&P Dow S&P Dow Jones IndicesJones Indices LLC, LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA] , retrieved from , retrieved from
FRED, FederalFRED, Federal Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA. Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA.
3536 S&P Dow S&P Dow Jones IndicesJones Indices LLC, LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA] , retrieved from , retrieved from
FRED, FederalFRED, Federal Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA. Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA.
3637 Black Knight, Black Knight’s August Black Knight, Black Knight’s August 2020 Mortgage Monitor: At Current Rate of Improvement, Delinquencies Will 2020 Mortgage Monitor: At Current Rate of Improvement, Delinquencies Will
Remain Above Pre-Pandemic Levels Until 2022; Loss Mitigation and High Levels of Equity Help Mitigate Foreclosure Remain Above Pre-Pandemic Levels Until 2022; Loss Mitigation and High Levels of Equity Help Mitigate Foreclosure
Risk, October 5, 2020, p.16, at https://www.blackknightinc.com/black-knights-august-2020-mortgage-monitor/. Risk, October 5, 2020, p.16, at https://www.blackknightinc.com/black-knights-august-2020-mortgage-monitor/.
3738 Regulatory changes following the 2007-2009 financial crisis pertaining to mortgage servicing may also be making it Regulatory changes following the 2007-2009 financial crisis pertaining to mortgage servicing may also be making it
easier to accommodate many consumers having trouble paying their mortgages. For more information on mortgage easier to accommodate many consumers having trouble paying their mortgages. For more information on mortgage
servicing, see CRSservicing, see CRS Insight IN11377, Insight IN11377, Mortgage Servicing Rights and Selected Market ~~Developments~~Developm ents, by Darryl E. , by Darryl E.
Getter. Getter.
3839 For more information on the policy issues related to foreclosure and mortgage loan modifications, see For more information on the policy issues related to foreclosure and mortgage loan modifications, see ~~CRS~~ CRS Report Report
R40210, R40210, Preserving ~~Homeownership~~Hom eownership: Foreclosure Prevention Initiatives, by Katie Jones. , by Katie Jones.
3940 Jean Eaglesham and Ken Brown, Jean Eaglesham and Ken Brown, “Auto-Lending Binge “Auto-Lending Binge ~~Threatens~~T hreatens to Unwind When Stimulus to Unwind When Stimulus ~~Measures~~ Measures Ease,” Ease,” Wall
Street Journal, August, August 7, 2020, at https://www.wsj.com/articles/auto-lending-binge-threatens-to-unwind-when-7, 2020, at https://www.wsj.com/articles/auto-lending-binge-threatens-to-unwind-when-
stimulus-measures-ease-11596798003. stimulus-measures-ease-11596798003.
4041 Nathan Bomey, “Used Car Prices Spiking as Nathan Bomey, “Used Car Prices Spiking as COVID-19 Pandemic ShakesCOVID-19 Pandemic Shakes up the Market for New Cars,” up the Market for New Cars,” USA
Today, August, August 5, 2020, at https://www.usatoday.com/story/money/cars/2020/08/05/car-prices-coronavirus-pandemic-5, 2020, at https://www.usatoday.com/story/money/cars/2020/08/05/car-prices-coronavirus-pandemic-
new-trucks-suvs/3297869001/. new-trucks-suvs/3297869001/.
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Policy Impacts on Household Finances
The initialThe initial economic policy response to the COVID-19 pandemic was swift and large, as economic policy response to the COVID-19 pandemic was swift and large, as
compared with that of previous recessions.compared with that of previous recessions.4142 This response to the economic impacts of the This response to the economic impacts of the
pandemic have likelypandemic have likely prevented many consumers from prevented many consumers from ~~falling~~fal ing delinquent on their loan payments. delinquent on their loan payments.
This section highlights two important policy impacts that influenced these trends: consumer loan This section highlights two important policy impacts that influenced these trends: consumer loan
forbearance and macroeconomic policy to support households during the economic recession. forbearance and macroeconomic policy to support households during the economic recession.
Consumer Loan Forbearance and Other Financial Policy Responses
For Americans having trouble paying their loan obligations due to the COVID-19 pandemic, For Americans having trouble paying their loan obligations due to the COVID-19 pandemic,
Congress, financial regulators, and financial institutions responded by providing consumers relief Congress, financial regulators, and financial institutions responded by providing consumers relief
options, such as loan forbearance. A consumer’s ability to get a forbearance and the types of options, such as loan forbearance. A consumer’s ability to get a forbearance and the types of
terms under the forbearance may be significantly influenced by what type of institution owns the terms under the forbearance may be significantly influenced by what type of institution owns the
loan. These various institutions—including banks and credit unions, private nonbank financial loan. These various institutions—including banks and credit unions, private nonbank financial
institutions, government-sponsored enterprises (GSEs), and the federal government—are subject institutions, government-sponsored enterprises (GSEs), and the federal government—are subject
to different laws, regulations, and business considerations. As mentioned earlier, the CARES Act to different laws, regulations, and business considerations. As mentioned earlier, the CARES Act
establishes consumer rights to be granted forbearance for establishes consumer rights to be granted forbearance for ~~federally~~federal y backed mortgages for up to a backed mortgages for up to a
year (Section 4022) and for federal student loans (Section 3513), now through the end of 2020 year (Section 4022) and for federal student loans (Section 3513), now through the end of 2020
due to administrative actions.due to administrative actions.4243 The law also protects the credit histories of consumers with The law also protects the credit histories of consumers with
forbearance agreements until 120 days after the national emergency declared by the President on forbearance agreements until 120 days after the national emergency declared by the President on
March 13, 2020, terminates (Section 4021).March 13, 2020, terminates (Section 4021).4344 However, the act does not grant consumers loan However, the act does not grant consumers loan
forbearance for other types of consumer loan obligations, such as auto loans, credit cards, private forbearance for other types of consumer loan obligations, such as auto loans, credit cards, private
student loans, and bank-owned mortgages. In these cases, financial institutions have discretion student loans, and bank-owned mortgages. In these cases, financial institutions have discretion
about when and how to offer loan forbearance or other relief options to consumers. Therefore, about when and how to offer loan forbearance or other relief options to consumers. Therefore,
financial regulatory agencies have used existing statutory authorities to encourage loan financial regulatory agencies have used existing statutory authorities to encourage loan
forbearance and other financial relief options for affected consumers.forbearance and other financial relief options for affected consumers.4445 In response, many banks In response, many banks
and credit unions have announced measures to offer various forms of assistance to affected and credit unions have announced measures to offer various forms of assistance to affected
consumers. Forbearance, particularly mortgage forbearance, may help consumers pay other bil s. Mortgage debt is the largest debt obligation for many families. About two-thirds of al mortgage loans in the 42~~consumers.~~

41 Romina Boccia and Justin Bogie, Romina Boccia and Justin Bogie, This Is How Big the COVID-19 CARES Act Relief Bill Is, , ~~The~~T he Heritage Foundation, Heritage Foundation,
April 20, 2020, at https://www.heritage.org/budget-and-spending/commentary/how-big-the-covid-19-cares-act-relief-April 20, 2020, at https://www.heritage.org/budget-and-spending/commentary/how-big-the-covid-19-cares-act-relief-
bill. bill.
4243 For more information on For more information on ~~Title~~T itle IV of the Coronavirus Aid, IV of the Coronavirus Aid, Relief, and Economic Security Act (CARESRelief, and Economic Security Act (CARES Act;Act; P.L. P.L.
116-136), which contains a number of provisions aimed broadly at stabilizing the economy and helping affected 116-136), which contains a number of provisions aimed broadly at stabilizing the economy and helping affected
households and businesses,households and businesses, see CRSsee CRS Report R46301, Report R46301, Title IV Provisions of the CARES Act (P.L. 116 -136), coordinated , coordinated
by Andrewby Andrew P. ScottP. Scott . For more information about federal student loan debt. For more information about federal student loan debt relief in the context of COVID-19, see CRS relief in the context of COVID-19, see CRS
Report R46314, Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19, by Alexandra Hegji. , by Alexandra Hegji.
4344 For more information on the credit reporting industry, see CRS For more information on the credit reporting industry, see CRS Report R44125, Report R44125, Consumer Credit Reporting, Credit
Bureaus, Credit Scoring, and Related Policy Issues, by Cheryl R. Cooper and Darryl E. Getter. , by Cheryl R. Cooper and Darryl E. Getter.
4445 Many financial regulatory agencies have updated their guidance to help financial firms support consumer needs Many financial regulatory agencies have updated their guidance to help financial firms support consumer needs
duringduring this time. Regulatory guidancethis time. Regulatory guidance ~~does~~ does not force financial institutions to take any particular action for consumers not force financial institutions to take any particular action for consumers
(such as offering loan forbearance), but it can (such as offering loan forbearance), but it can ~~encourage~~enco urage them to offer various forms of support. For more information them to offer various forms of support. For more information
on mortgage and bank regulators’ responses to COVID-19, see CRSon mortgage and bank regulators’ responses to COVID-19, see CRS Insight IN11316, COVID-19: Support for Insight IN11316, COVID-19: Support for
Mortgage Lenders and Servicers, by Andrew P. Scott and DarrylMortgage Lenders and Servicers, by Andrew P. Scott and Darryl E. GetterE. Getter; ; and CRSand CRS Insight IN11278, Insight IN11278, Bank and
Credit Union Regulators’ Response to COVID-19, by Andrew, by Andrew P. Scott and David W. Perkins. In P. Scott and David W. Perkins. In
addition, the Federal Reserve has provided liquidityaddition, the Federal Reserve has provided liquidity to supportto support financial markets in response to COVID-19. For more financial markets in response to COVID-19. For more
information, see CRSinformation, see CRS Insight IN11259, Insight IN11259, Federal Reserve: Recent Actions in Response to COVID-19, by Marc Labonte. , by Marc Labonte.
Congressional Research Service Congressional Research Service
10 10

COVID-19: Household Debt ~~during the Pandemic~~

~~Forbearance, particularly mortgage forbearance, may help consumers pay other bills. Mortgage~~
~~debt is the largest debt obligation for many families. About two-thirds of all mortgage loans in the~~
During the Pandemic United States were held or insured by the federal government and, therefore, covered by the United States were held or insured by the federal government and, therefore, covered by the
CARES Act’s consumer right to be granted loan forbearance.CARES Act’s consumer right to be granted loan forbearance.4546 Therefore, many Americans may Therefore, many Americans may
be able to access loan forbearance on their mortgage debt. For a family who lost income during be able to access loan forbearance on their mortgage debt. For a family who lost income during
the COVID-19 pandemic, skipping monthly payments on a mortgage or other loan may the COVID-19 pandemic, skipping monthly payments on a mortgage or other loan may ~~allow~~al ow the the
family to have enough money for food and other expenses during the month. In this way, access family to have enough money for food and other expenses during the month. In this way, access
to loan forbearance on one loan may help a consumer stay current on other loans, providing to loan forbearance on one loan may help a consumer stay current on other loans, providing
needed financial relief. needed financial relief.
Although many Americans took advantage of loan forbearance, some households affected by Although many Americans took advantage of loan forbearance, some households affected by
COVID-19 may not have requested or received loan forbearance. Some consumers’ loans may COVID-19 may not have requested or received loan forbearance. Some consumers’ loans may
~~fall~~ fal outside of those with rights under the CARES Act. In addition, many consumers may not be outside of those with rights under the CARES Act. In addition, many consumers may not be
aware of the forbearance or credit reporting benefits in the CARES Act, which may make it more aware of the forbearance or credit reporting benefits in the CARES Act, which may make it more
difficult for them to access these benefits.difficult for them to access these benefits.4647 According to a Federal Reserve Bank of Philadelphia According to a Federal Reserve Bank of Philadelphia
survey, as of June 2020, less than a third of American consumers were aware of the CARES Act survey, as of June 2020, less than a third of American consumers were aware of the CARES Act
right to mortgage forbearance for right to mortgage forbearance for ~~federally~~federal y backed mortgages and fewer were aware of the credit backed mortgages and fewer were aware of the credit
reporting accommodations.reporting accommodations.4748
Fiscal Policy Responses
In addition to consumer loan forbearance rights, the CARES Act also provided fiscal stimulus In addition to consumer loan forbearance rights, the CARES Act also provided fiscal stimulus
that included income support for households, such as enhanced unemployment insurance and that included income support for households, such as enhanced unemployment insurance and
relief checks. These income transfer programs may have helped some consumers make their relief checks. These income transfer programs may have helped some consumers make their
consumer credit payments on time, particularly those who lost income during the COVID-19 consumer credit payments on time, particularly those who lost income during the COVID-19
pandemic. pandemic. ~~For example, evidence~~Evidence suggests that these programs, along with other provisions in the CARES Act, such as the Paycheck Protection Program, increased total personal income during the second and third quarters of 2020.49 In fact, personal income remained higher in the third quarter of 2020 than before the pandemic began.50 This is highly unusual during a recession and likely contributed to household debt patterns. For these reasons, some research suggests that fiscal programs in the CARES Act may be limiting disruptions in the housing market.51 This section discusses two income transfer programs in the CARES Act—enhanced unemployment benefits and economic impact payments—and discusses how they may have helped some consumers meet their loan obligations. 46 For ownership of all mortgage loans in the United States, see Federal Reserve, “Financial Accounts of the United States— ~~suggests that these programs may be limiting disruptions in the~~
~~housing market.48 This section discusses two income transfer programs in the CARES Act—~~
~~enhanced unemployment benefits and economic impact payments—and discusses how they may~~
~~have helped some consumers meet their loan obligations.~~
~~Enhanced Unemployment Benefits~~
~~Families with unemployed workers may be the most likely to have trouble paying their bills~~
~~during the pandemic. Unemployment insurance can substitute for lost income and help families~~
~~meet payment obligations.~~
~~As Americans became unemployed at historic rates, Congress enhanced federal unemployment~~
~~benefits in the CARES Act, providing unemployed workers with more support for an extended~~
~~period of time, beyond what the worker would normally be eligible to receive. The act provided a~~

~~45 For ownership of all mortgage loans in the United States, see Federal Reserve, “Financial Accounts of the United~~
~~States –~~ Z.1, 2020: Q1 release,” June 11, 2020, at https://www.federalreserve.gov/releases/z1/. Mortgage loans heldZ.1, 2020: Q1 release,” June 11, 2020, at https://www.federalreserve.gov/releases/z1/. Mortgage loans held or or
insuredinsured by the federal government are not reported by age of mortgage borrower.by the federal government are not reported by age of mortgage borrower.
46 47 Douglas Douglas Duncan, Duncan, COVID-19: The Need for Consumer Outreach and Home Purchase/Financing Digitization , Fannie , Fannie
Mae, Perspectives Blog, AugustMae, Perspectives Blog, August 12, 2020, at https://www.fanniemae.com/research-and-insights/perspectives/covid-19-12, 2020, at https://www.fanniemae.com/research-and-insights/perspectives/covid-19-
need-consumer-outreach-and-home-purchasefinancing-digitization. need-consumer-outreach-and-home-purchasefinancing-digitization.
4748 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
~~Consumers~~Consum ers—Wave 3 Reveals ~~Improvements~~Im provem ents, but Not for Everyone,” pp. 11-13, 31, at https://www.philadelphiafed.org/-,” pp. 11-13, 31, at https://www.philadelphiafed.org/-
/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave3-updates.pdf. /media/covid/cfi/cfi-covid-19-survey-of-consumers-wave3-updates.pdf.
~~48 Chris Cunningham and Kris Gerardi,~~ 49 For more informat ion on the Paycheck Protection Program (PPP), see CRS Report R46397, SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief, by Robert Jay Dilger and Sean Lowry. 50 For more information about the effect of policy on personal income during COVID-19, see CRS Report R46606, COVID-19 and the U.S. Econom y, by Lida R. Weinstock; and CRS In Focus IF10501, Introduction to U.S. Economy: Personal Incom e, by Lida R. Weinstock. 51 Chris Cunningham and Kris Gerardi, COVID-19 Mortgage Relief—The Role of Income Support, Federal Reserve , Federal Reserve
Bank of Atlanta, MacroBlog, May 27, 2020, at https://www.frbatlanta.org/blogs/macroblog/2020/05/27/covid-19-Bank of Atlanta, MacroBlog, May 27, 2020, at https://www.frbatlanta.org/blogs/macroblog/2020/05/27/covid-19-
mortgage-relief-the-role-of-income-support. mortgage-relief-the-role-of-income-support.
Congressional Research Service Congressional Research Service
11 11

COVID-19: Household Debt ~~during~~During the Pandemic Enhanced Unemployment Benefits Families with unemployed workers may be the most likely to have trouble paying their bil s during the pandemic. Unemployment insurance can substitute for lost income and help families meet payment obligations. As Americans became unemployed at historic rates, Congress enhanced federal unemployment benefits in the CARES Act, providing unemployed workers with more support for an extended period of time, beyond what the worker would normal y be eligible to receive. The act provided a ~~the Pandemic~~

weekly supplemental payment of $600 to those receiving benefits through the end of July and weekly supplemental payment of $600 to those receiving benefits through the end of July and
extended unemployment insurance benefits for 13 weeks. In addition, the act provided extended unemployment insurance benefits for 13 weeks. In addition, the act provided
unemployment benefits to some not unemployment benefits to some not ~~normally~~normal y eligible eligible for unemployment insurance.for unemployment insurance.4952 Estimates Estimates
suggest that most workers received at least as much in benefits as they lost in wages.suggest that most workers received at least as much in benefits as they lost in wages.50
53 Following the expiration of the enhanced unemployment benefits at the end of July, President Following the expiration of the enhanced unemployment benefits at the end of July, President
Trump issued a memorandum on August 8, 2020, which Trump issued a memorandum on August 8, 2020, which ~~called~~cal ed on his Administration to approve a on his Administration to approve a
lost wages assistance program that would authorize state governors to provide $400 per week, lost wages assistance program that would authorize state governors to provide $400 per week,
$300 of which would be provided by the federal government as long as disaster relief funds last.$300 of which would be provided by the federal government as long as disaster relief funds last.5154
These unemployment benefits likely made it possible for some families with an unemployed These unemployment benefits likely made it possible for some families with an unemployed
worker to pay their worker to pay their ~~bills~~bil s during the spring and summer of 2020. during the spring and summer of 2020.
Economic Impact Payments
The CARES Act also provided one-time direct payments to households equal to $1,200 per adult The CARES Act also provided one-time direct payments to households equal to $1,200 per adult
individualindividual and $500 per child, with amounts phased out for higher-income taxpayers.and $500 per child, with amounts phased out for higher-income taxpayers.5255 Payments Payments
began in April 2020.began in April 2020.5356 According to the IRS, more than 160 According to the IRS, more than 160 ~~million~~ mil ion economic impact payments economic impact payments
were delivered by August 14, 2020.were delivered by August 14, 2020.5457 Economic impact payments constituted more than 12% of Economic impact payments constituted more than 12% of
total personal income in the United States in April 2020.58 52 For more information on the unemployment insurance provisions in the CARES Act, see CRS In Focus IF11475, Unem ploym ent Insurance Provisions in the CARES Act, by Katelin P. Isaacs and Julie M. Whittaker. 53~~total personal income in the United States in April 2020.55~~
~~Current research suggests that many consumers used their impact payments to pay monthly bills~~
~~or pay down debt. A National Bureau of Economic Research working paper using a large-scale~~
~~survey of consumers found that 52% of respondents said they used the funds to pay down debt,~~
~~33% said they mostly saved it, and 15% said they spent or planned to spend most of it.56 Those~~
~~who reported using the economic impact payments to pay off debts were more likely to be~~
~~unemployed, have COVID-19-related earnings losses, or have a mortgage, compared with other~~
~~groups. On average, individuals reported spending around 40% of the payment, but this rate was~~

~~49 For more information on the unemployment insurance provisions in the CARES Act, see CRS In Focus IF11475,~~
Unemployment Insurance Provisions in the CARES Act, by Katelin P. Isaacs and Julie M. Whittaker.
50 Peter Ganong, Pascal Noel, and Joseph Vavra, Peter Ganong, Pascal Noel, and Joseph Vavra, US Unemployment Insurance Replacement Rates During the
~~Pandemic~~Pandem ic, University of Chicago, Becker Friedman Institute for Economics, Working Paper no. 2020-62, August 24, , University of Chicago, Becker Friedman Institute for Economics, Working Paper no. 2020-62, August 24,
2020. 2020.
5154 U.S. U.S. President (President (~~Trump~~T rump), “Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster ), “Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster
Declarations Related to Coronavirus DiseaseDeclarations Related to Coronavirus Disease 2019,”2019,” Weekly Compilation of Presidential Documents, August, August 8, 2020. 8, 2020.
For more information on this memorandum, see CRSFor more information on this memorandum, see CRS Legal SidebarLegal Sidebar LSB10532, LSB10532, President ~~Trump~~Trum p’s Executive Actions
on Student Loans, Wage Assistance, Payroll Taxes, and Evictions: Initial Takeaways, by Kevin M. Lewis,, by Kevin M. Lewis, ~~Sean~~ Sean M. M.
Stiff, and Jay B.Stiff, and Jay B. Sykes. Sykes.
5255 For more information on the direct payments to individuals in the CARES For more information on the direct payments to individuals in the CARES Act, see CRSAct, see CRS Insight IN11282, Insight IN11282, COVID-19
and Direct ~~Payments~~Paym ents to Individuals: ~~Summary~~Sum m ary of the 2020 Recovery Rebates/~~Economic~~Econom ic Impact Payments in the CARES
Act (P.L. 116-136), by Margot L. Crandall-Hollick. , by Margot L. Crandall-Hollick.
5356 U.S. U.S. Congress, HouseCongress, House Committee on Ways and Means, Committee on Ways and Means, Expected Timeline for Economic Impact Payments, 116th , 116th
Cong., April 16, 2020, at https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/Cong., April 16, 2020, at https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/
2020.04.16%20Rebate%20Payment%20Timeline%20FINAL.pdf2020.04.16%20Rebate%20Payment%20Timeline%20FINAL.pdf . 57.
54 Internal Revenue Service, “IRS takes new Internal Revenue Service, “IRS takes new steps to ensure people with children receive $500 Economic Impact steps to ensure people with children receive $500 Economic Impact
Payments,” press release, AugustPayments,” press release, August 14, 2020, at https://www.irs.gov/newsroom/irs-takes-new-steps-to-ensure-people-14, 2020, at https://www.irs.gov/newsroom/irs-takes-new-steps-to-ensure-people-
with-children-receive-500-economic-impact-payments. with-children-receive-500-economic-impact-payments.
5558 Bureau Bureau of Economic Analysis, of Economic Analysis, Effects of Selected Federal Pandemic Response Programs on Personal Income, June
2020, July 31, 2020, at https://www.bea.gov/system/files/2020-07/effects-of-selected-federal-pandemic-response-, July 31, 2020, at https://www.bea.gov/system/files/2020-07/effects-of-selected-federal-pandemic-response-
programs-on-personal-income-june-2020.pdf. programs-on-personal-income-june-2020.pdf.
~~56 Olivier Coibion, Yuriy Gorodnichenko, and Michael Weber, “How Did U.S. Consumers Use Their Stimulus~~
~~Payments?” National Bureau of Economic Research, Working Paper no. 27693, August 2020, pp. 2-3.~~
~~Congressional Research Service~~
12

~~COVID-19: Household Debt during the Pandemic~~

Congressional Research Service 12 COVID-19: Household Debt During the Pandemic Current research suggests that many consumers used their impact payments to pay monthly bil s or pay down debt. A National Bureau of Economic Research working paper using a large-scale survey of consumers found that 52% of respondents said they used the funds to pay down debt, 33% said they mostly saved it, and 15% said they spent or planned to spend most of it.59 Those who reported using the economic impact payments to pay off debts were more likely to be unemployed, have COVID-19-related earnings losses, or have a mortgage, compared with other groups. On average, individuals reported spending around 40% of the payment, but this rate was higher for those facing liquidity constraints, unemployed, living in larger households, less higher for those facing liquidity constraints, unemployed, living in larger households, less
educated, and who received payments of less than $1,200. educated, and who received payments of less than $1,200.
Fiscal Stimulus During a Recession
Consumer spending is a key driver of short-run economic Consumer spending is a key driver of short-run economic growth in the U.S. economy.growth in the U.S. economy. As happened with the As happened with the
COVID-19 pandemic, significant drops in consumer spending can cause drops in aggregate demand (COVID-19 pandemic, significant drops in consumer spending can cause drops in aggregate demand (~~overall~~
overal spending), of which consumer spending is a significant component.spending), of which consumer spending is a significant component. Such a Such a ~~fall~~ fal in aggregate demand wilin aggregate demand wil ~~generally~~ general y
result in slowerresult in slower wage growth, decreased employment,wage growth, decreased employment, lower business revenue,lower business revenue, and lowerand lower business investment. business investment.
Lost jobs and wage incomeLost jobs and wage income can cause morecan cause more reductions in consumer spending, leading to a morereductions in consumer spending, leading to a more ~~severe~~ severe recession. recession.
Conventional macroeconomicConventional macroeconomic theory theory ~~generally~~ general y supports the use of fiscal stimulussupports the use of fiscal stimulus in the form of shortin the form of short -term -term
government spending increasesgovernment spending increases or tax decreases designed to temporarilyor tax decreases designed to temporarily spur economic activity.spur economic activity.5760 According to According to
this theory, fiscal stimulusthis theory, fiscal stimulus can mitigate the decline in aggregate demand, reduce employmentcan mitigate the decline in aggregate demand, reduce employment gaps, and guide the gaps, and guide the
economy back to the ful -employmenteconomy back to the ful -employment ~~more~~ more quickly than would otherwisequickly than would otherwise occur.occur. Fiscal policy,Fiscal policy, such as taxes and such as taxes and
transfers,transfers, can directly support a household’s income.can directly support a household’s income. Fiscal policy also affects household incomeFiscal policy also affects household income and spending and spending
indirectly,indirectly, through its effect on aggregate demand, leading to reduced unemployment and higher income.through its effect on aggregate demand, leading to reduced unemployment and higher income. In these In these
ways, fiscal stimulus can help a household sustain its regular spending and moreways, fiscal stimulus can help a household sustain its regular spending and more easily pay its loan obligations. easily pay its loan obligations.
Future Household Finance Outlook
During the summer of 2020, some industry reports described declines in consumer loan During the summer of 2020, some industry reports described declines in consumer loan
forbearance requests in mortgage, auto, credit card, and other consumer credit markets.forbearance requests in mortgage, auto, credit card, and other consumer credit markets.58
61 However, it is unclear whether this pattern However, it is unclear whether this pattern ~~will~~ wil continue. Future economic projections look continue. Future economic projections look
uncertain, as it is difficult to predict the trajectory of future COVID-19 outbreaks and their uncertain, as it is difficult to predict the trajectory of future COVID-19 outbreaks and their
subsequent economic impacts. This section of the report discusses major uncertainties relating to subsequent economic impacts. This section of the report discusses major uncertainties relating to
the outlook for household debt and consumer credit markets. The first subsection describes the outlook for household debt and consumer credit markets. The first subsection describes
current macroeconomic uncertainties; the second subsection discusses the importance of future current macroeconomic uncertainties; the second subsection discusses the importance of future
public policy; and the last subsection discusses uncertainties in consumer credit markets.public policy; and the last subsection discusses uncertainties in consumer credit markets.
Future Macroeconomic Outlook Uncertainty
The path of economic recovery from the COVID-19 pandemic is highly uncertain. The economic The path of economic recovery from the COVID-19 pandemic is highly uncertain. The economic
outlook is largely being driven by a public health crisis that is, in and of itself, difficult to predict. outlook is largely being driven by a public health crisis that is, in and of itself, difficult to predict.
To a large extent, the economy is unlikely to fully recover until the pandemic has ended. Fears of To a large extent, the economy is unlikely to fully recover until the pandemic has ended. Fears of
the virus and social distancing measures make it unlikely that commerce can regain its pre-the virus and social distancing measures make it unlikely that commerce can regain its pre-
pandemic pace while COVID-19 pandemic pace while COVID-19 ~~still~~ stil poses a threat. Workers in certain industries, such as retail, poses a threat. Workers in certain industries, such as retail,
restaurant, and travel, may not recover their jobs until local health regulations allow normal restaurant, and travel, may not recover their jobs until local health regulations allow normal
~~operations and consumers demand these services again. Therefore, economic activity may depend~~
~~on factors such as when a vaccine will be readily available or advances in treatment. In this case,~~
~~forecasting when employment will recover may be difficult. Yet current projections suggest~~
~~possible long-run economic impacts. The Congressional Budget Office (CBO) forecasts, as of~~
~~July 2020, that both real gross domestic product will remain below its potential and the~~
~~unemployment rate will remain above the 2019 rate for the remainder of the decade (i.e., through~~
~~2030).59 The forecast assumes no policy changes and is subject to change. Other forecasts are~~

57 59 Olivier Coibion, Yuriy Gorodnichenko, and Michael Weber, “How Did U.S. Consumers Use T heir Stimulus Payments?” National Bureau of Economic Research, Working Paper no. 27693, August 2020, pp. 2 -3. 60 For more information on fiscal policy, see CRS For more information on fiscal policy, see CRS In Focus IF11253, In Focus IF11253, Introduction to U.S. Economy: Fiscal Policy, by , by
Lida R.Lida R. Weinstock; and CRSWeinstock; and CRS Report R45723, Report R45723, Fiscal Policy: ~~Economic~~Econom ic Effects, by Marc Labonte. , by Marc Labonte.
5861 Jon Prior, “PNC sees Steep Decline in Forbearance Requests. Jon Prior, “PNC sees Steep Decline in Forbearance Requests. Will it Last?” Will it Last?” American Banker, July, July 15, 2020; and 15, 2020; and
Jim Dobbs,Jim Dobbs, “Big Banks Keeping Consumer Loan Losses in Check, at Least for Now,”“Big Banks Keeping Consumer Loan Losses in Check, at Least for Now,” American Banker, July 14, 2020. , July 14, 2020.
~~59 Congressional Budget Office, An Update to the Economic Outlook: 2020 to 2030, July 2, 2020, at~~
~~Congressional Research Service~~
13

~~COVID-19: Household Debt during the Pandemic~~

Congressional Research Service 13 COVID-19: Household Debt During the Pandemic operations and consumers demand these services again. Therefore, economic activity may depend on factors such as when a vaccine wil be readily available or advances in treatment. In this case, forecasting when employment wil recover may be difficult. Yet current projections suggest possible long-run economic impacts. The Congressional Budget Office (CBO) forecasts, as of July 2020, that both real gross domestic product wil remain below its potential and the unemployment rate wil remain above the 2019 rate for the remainder of the decade (i.e., through 2030).62 The forecast assumes no policy changes and is subject to change. Other forecasts are more optimistic about the rate of recovery, although they also suggest that the effects of COVID-more optimistic about the rate of recovery, although they also suggest that the effects of COVID-
19 on unemployment may be long lasting.19 on unemployment may be long lasting.60
63 Future Public Policy Uncertainty
Future public policy Future public policy ~~will~~ wil affect the course of the economic recovery affect the course of the economic recovery ~~generally~~general y and developments and developments
in household debt markets more in household debt markets more ~~specifically~~specifical y. Mortgage and student loan forbearance programs . Mortgage and student loan forbearance programs
are are ~~still~~ stil in effect, but when these programs expire, some consumers may in effect, but when these programs expire, some consumers may ~~fall~~ fal delinquent on their delinquent on their
loans. In addition, loans. In addition, ~~the~~many CARES Act fiscal policy provisions have expired or been exhausted, and personal income has general y declined since April. 64 The July expiration of the CARES Act’s supplemental unemployment insurance July expiration of the CARES Act’s supplemental unemployment insurance
payments could payments could ~~also~~ result in more consumers result in more consumers ~~eventually~~ eventual y being unable to stay current on their being unable to stay current on their
loans. President Trump’s memorandum extends a lower supplemental payment for some loans. President Trump’s memorandum extends a lower supplemental payment for some
unemployed workers, but reports suggest that these supplemental unemployed workers, but reports suggest that these supplemental payments started to expire as of payments started to expire as of
the end of August in some states.the end of August in some states.~~61 A~~65 For example, a recent research study suggests that in August, without the recent research study suggests that in August, without the
benefit supplement, many unemployed workers may benefit supplement, many unemployed workers may have depleted their savings and reduced have depleted their savings and reduced
their spending.their spending.6266
Some families losing unemployment insurance funds may have more trouble paying their Some families losing unemployment insurance funds may have more trouble paying their
monthly consumer loan obligations with a reduced benefit.monthly consumer loan obligations with a reduced benefit.6367 Industry reports suggest concerns Industry reports suggest concerns
about future delinquencies or defaults on consumer loans without additional government about future delinquencies or defaults on consumer loans without additional government
~~stimulus, such as unemployment aid.64 CBO stated that “if the additional $600 per week was~~
~~extended ... the extension would allow people to make more payments on loans and therefore~~
~~have greater access to credit in the future than they would have otherwise.”65~~
~~Congress is currently debating whether COVID-19 pandemic relief provisions should be~~
~~extended or whether the cost of these proposals outweigh their benefits.66 Active legislation that~~
~~would modify, extend, or create new stimulus programs includes~~

62 Congressional Budget Office, An Update to the Economic Outlook: 2020 to 2030, July 2, 2020, at https://www.cbo.gov/publication/56442. https://www.cbo.gov/publication/56442.
6063 For example, see Board of Governors of the Federal Reserve System, For example, see Board of Governors of the Federal Reserve System, FOMC Economic Projections, June 10, 2020, , June 10, 2020,
at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200610.pdf; and Wall Street Journal, at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200610.pdf; and Wall Street Journal, ~~Economic~~Econom ic
Forecasting Survey, June, June 1, 2020, at https://www.wsj.com/graphics/econsurvey/.1, 2020, at https://www.wsj.com/graphics/econsurvey/. For more information on the current For more information on the current
unemployment rate outlook, and what those changes wouldunemployment rate outlook, and what those changes would mean for the economy, seemean for the economy, see ~~CRS~~ CRS Insight IN11460, Insight IN11460, COVID-
19: How Quickly Will ~~Unemployment~~ Unem ploym ent Recover? , by Lida R. Weinstock. , by Lida R. Weinstock.
~~61 Jeff Stein and Eli Rosenberg, “Trump’s $300 Unemployment Funding is Already Running Out, Leaving Millions in~~
~~Crisis~~ 64 For more information about the effect of policy on personal income during COVID-19, see CRS Report R46606, COVID-19 and the U.S. Econom y, by Lida R. Weinstock; and CRS In Focus IF10501, Introduction to U.S. Economy: Personal Incom e, by Lida R. Weinstock. 65 Jeff Stein and Eli Rosenberg, “T rump’s $300 Unemployment Funding is Already Running Out, Leaving Millions in Crisis Again,” Again,” Washington Post, September 11, 2020; and Elisabeth Buchwald,, September 11, 2020; and Elisabeth Buchwald, “More than 30 States are Preparing to “More than 30 States are Preparing to
Distribute an Extra $300 in Unemployment Benefits—But How Long Will that Last?” Distribute an Extra $300 in Unemployment Benefits—But How Long Will that Last?” MarketWatch, August, August 31, 2020 31, 2020
at https://www.marketwatch.com/story/more-than-30-states-have-distributed-an-extra-300-in-unemployment-benefits-at https://www.marketwatch.com/story/more-than-30-states-have-distributed-an-extra-300-in-unemployment-benefits-
but-how-long-will-thatbut-how-long-will-that -last-2020-08-27. -last-2020-08-27.
6266 Diana Farrell et al., Diana Farrell et al., The Unemployment Benefit Boost: Trends in Spending and Saving when the $600 Supplement
Ended, JPMorgan Chase & Co. Institute, Policy Brief, October 2020, at https://institute.jpmorganchase.com/content/, JPMorgan Chase & Co. Institute, Policy Brief, October 2020, at https://institute.jpmorganchase.com/content/
dam/jpmc/jpmorgan-chase-and-co/institute/pdf/Institute-UI-Benefits-Boostdam/jpmc/jpmorgan-chase-and-co/institute/pdf/Institute-UI-Benefits-Boost -Policy-Brief_ADA.pdf. -Policy-Brief_ADA.pdf.
6367 Economists from Goldman Sachs Economists from Goldman Sachs estimated that the expiration of the $600 supplemental payment could result in a estimated that the expiration of the $600 supplemental payment could result in a
$70 billion hit to personal income in August,$70 billion hit to personal income in August, with the additional $300 benefit possibly covering up to $35 billion of with the additional $300 benefit possibly covering up to $35 billion of
that, if fully implemented in August.that, if fully implemented in August. If personal income wasIf personal income was ~~lowered~~ lowered by the full $70 billion, economists estimate this by the full $70 billion, economists estimate this
wouldwould translate to a reduction in consumer spending translate to a reduction in consumer spending ~~power~~p ower by about 6.5% of personal consumption expenditures (PCE) by about 6.5% of personal consumption expenditures (PCE)
in August.in August. Blake Blake ~~Taylor~~T aylor, “US Daily: , “US Daily: ~~The~~T he New New $300 Benefit: $300 Benefit: ~~Too Little Too~~T oo Little T oo Late for August Spending,” Late for August Spending,” Goldman
Sachs ~~Economics~~Econom ics Research, August, August ~~23, 2020.~~
~~64 Jon Prior, “Lenders Fear Mass Defaults Unless Unemployment Benefits are Extended,” American Banker, July 23,~~
~~2020.~~
~~65 Phillip L. Swagel, Economic Effects of Additional Unemployment Benefits of $600 per Week, Congressional Budget~~
~~Office, June 4, 2020, pp. 4-5, at https://www.cbo.gov/system/files/2020-06/56387-CBO-Grassley-Letter.pdf.~~
~~66 For more information about the economic impact of COVID-19 pandemic relief provision extensions, see CRS~~
~~Insight IN11475, Economic Activity and the Expiration of COVID-19 Relief Provisions, by Grant A. Driessen and Lida~~
~~Congressional Research Service~~
14

~~COVID-19: Household Debt during the Pandemic~~

23, 2020. Congressional Research Service 14 COVID-19: Household Debt During the Pandemic stimulus, such as unemployment aid.68 CBO stated that “if the additional $600 per week was extended ... the extension would al ow people to make more payments on loans and therefore have greater access to credit in the future than they would have otherwise.”69 Congress is currently debating whether COVID-19 pandemic relief provisions should be extended or whether the cost of these proposals outweigh their benefits.70 Active legislation that would modify, extend, or create new stimulus programs includes  the Heroes Act ~~ the Heroes Act~~ (first version: H.R. 6800; second version: H.R. 925) in the House, (first version: H.R. 6800; second version: H.R. 925) in the House,
which first passed on May 15, 2020, then again on October 1, 2020; and which first passed on May 15, 2020, then again on October 1, 2020; and
 the American Workers, Families, and Employers Assistance Act (S. 4318) in the  the American Workers, Families, and Employers Assistance Act (S. 4318) in the
Senate, which was introduced on July 27, 2020. Senate, which was introduced on July 27, 2020.
Both Both ~~bills~~bil s include additional include additional relief payments to relief payments to ~~individuals67~~individuals71 and additional and additional unemployment unemployment
insurance benefits.insurance benefits.6872 In addition, the Heroes Act would expand consumer rights to loan In addition, the Heroes Act would expand consumer rights to loan
forbearance and other payment relief during the COVID-19 pandemic.forbearance and other payment relief during the COVID-19 pandemic.6973
Consumer Credit Market Uncertainty
Promoting loan forbearance as a solution for consumers having trouble meeting their loan Promoting loan forbearance as a solution for consumers having trouble meeting their loan
obligations made sense when the COVID-19 pandemic was expected to be short-lived. However, obligations made sense when the COVID-19 pandemic was expected to be short-lived. However,
if the economic impacts of the COVID-19 pandemic persist for a longer period of time, then loan if the economic impacts of the COVID-19 pandemic persist for a longer period of time, then loan
forbearance may only be delaying consumers from becoming delinquent and defaulting on their forbearance may only be delaying consumers from becoming delinquent and defaulting on their
loans, rather than preventing this outcome. If so, consumers may not be able to avoid the serious loans, rather than preventing this outcome. If so, consumers may not be able to avoid the serious
consequences of loan default, such as debt collection, foreclosure, car repossession, or wage consequences of loan default, such as debt collection, foreclosure, car repossession, or wage
garnishment. garnishment.
For lenders, if the economic impacts of the COVID-19 pandemic continue to cause prolonged For lenders, if the economic impacts of the COVID-19 pandemic continue to cause prolonged
disruptions and the CARES Act rights to loan forbearance expire, lenders may find that disruptions and the CARES Act rights to loan forbearance expire, lenders may find that
voluntarily extending loan forbearance becomes a less viable option. Questions exist about voluntarily extending loan forbearance becomes a less viable option. Questions exist about
whether deferrals whether deferrals ~~will~~ wil become current or whether they become current or whether they ~~will eventually~~wil eventual y need to be charged off. need to be charged off.7074
Large numbers of missed consumer loan payments—due to forbearance or delinquency—could Large numbers of missed consumer loan payments—due to forbearance or delinquency—could
~~have significant negative consequences for financial institutions and the financial system that~~
~~affects the future availability of credit.71 It is unclear, however, if the share of household debt at~~
~~risk of default may be enough to pose systemic risk to the financial system.72~~

~~R. Weinstock.~~
~~67 For more information on relief payments to individuals in these bills, see CRS Insight IN11397,~~ ~~COVID-19:~~
~~Summary of the Direct Payments Proposed in the Heroes Act (H.R. 6800), by Margot L. Crandall-Hollick; CRS Insight~~
~~IN11473,~~ ~~COVID-19: Summary of Direct Payments in the American Workers, Families, and Employers Assistance Act~~
~~(S. 4318), by Margot L. Crandall-Hollick; and CRS Insight IN11513,~~ ~~COVID-19 and Direct Payments to Individuals:~~
~~Comparison of Recent Proposals for a Second Round of Payments, by Margot L. Crandall-Hollick.~~
~~68 For more information on different unemployment insurance legislative proposals, see CRS Report R45478,~~
Unemployment Insurance: Legislative Issues in the 116th Congress, by Julie M. Whittaker and Katelin P. Isaacs.
~~69 For more information, see CRS Insight IN11405,~~ ~~Heroes Act (H.R. 6800/H.R. 925): Selected Consumer Loan~~
~~Provisions, by Cheryl R. Cooper.~~
~~70 For example, some lenders are interested in how public policy may impact consumer debt repayment patterns. See~~
~~Bruce Cundiff, Forbearance and Deferrals may Influence the Debt Payment Hierarchy, Visa, Visa Business and~~
~~Economic Insights, June 2020, at https://usa.visa.com/dam/VCOM/regional/na/us/partner-with-us/documents/payment-~~
~~hierarchy-insight-june-2020.pdf.~~
~~71 For more information on banks’ exposure to consumer loan defaults during the COVID-19 pandemic, see CRS~~
~~Insight IN11336, Bank Exposure to COVID-19 Risks: Mortgages and Consumer Loans, by David W. Perkins and Raj~~
~~Gnanarajah. For more information on banking developments during Q2 2020, see CRS Insight IN11500,~~ ~~COVID-19~~
~~Impact on the Banking Industry: Conditions in the Second Quarter of 2020, by David W. Perkins and Raj Gnanarajah.~~
~~For a broader overview of banking industry risks and policy responses during the COVID-19 pandemic, see CRS~~
~~Report R46422, COVID-19 and the Banking Industry: Risks and Policy Responses, coordinated by David W. Perkins.~~
~~72 A Wells Fargo report estimates that approximately 6% of household debt outstanding may be at risk. See Jay Bryson,~~
~~Tim Quinlan, and Shannon Seery, Household Debt at Risk Amid Job Losses, Wells Fargo Securities, Economics Group:~~
~~Special Commentary, August 26, 2020, at https://www.wellsfargo.com/com/insights/economics/special-reports/.~~
~~Congressional Research Service~~
15

~~COVID-19: Household Debt during the Pandemic~~
68 Jon Prior, “Lenders Fear Mass Defaults Unless Unemployment Benefits are Extended,” American Banker, July 23, 2020. 69 Phillip L. Swagel, Economic Effects of Additional Unemployment Benefits of $600 per Week, Congressional Budget Office, June 4, 2020, pp. 4-5, at https://www.cbo.gov/system/files/2020-06/56387-CBO-Grassley-Letter.pdf. 70 For more information about the economic impact of COVID-19 pandemic relief provision extensions, see CRS Insight IN11475, Econom ic Activity and the Expiration of COVID-19 Relief Provisions, by Grant A. Driessen and Lida R. Weinstock. 71 For more information on relief payments to individuals in these bills, see CRS Insight IN11397, COVID-19: Sum m ary of the Direct Paym ents Proposed in the Heroes Act (H.R. 6800) , by Margot L. Crandall-Hollick; CRS Insight IN11473, COVID-19: Sum m ary of Direct Paym ents in the Am erican Workers, Fam ilies, and Em ployers Assistance Act (S. 4318), by Margot L. Crandall-Hollick; and CRS Insight IN11513, COVID-19 and Direct Paym ents to Individuals: Com parison of Recent Proposals for a Second Round of Paym ents, by Margot L. Crandall-Hollick. 72 For more information on different unemployment insurance legislative proposals, see CRS Report R45478, Unem ploym ent Insurance: Legislative Issues in the 116th Congress, by Julie M. Whittaker and Katelin P. Isaacs. 73 For more information, see CRS Insight IN11405, Heroes Act (H.R. 6800/H.R. 925): Selected Consum er Loan Provisions, by Cheryl R. Cooper. 74 For example, some lenders are interested in how public policy may impact consumer debt repayment patterns. See Bruce Cundiff, Forbearance and Deferrals m ay Influence the Debt Paym ent Hierarchy, Visa, Visa Business and Economic Insights, June 2020, at https://usa.visa.com/dam/VCOM/regional/na/us/partner-with-us/documents/payment -hierarchy-insight-june-2020.pdf. Congressional Research Service 15 COVID-19: Household Debt During the Pandemic have significant negative consequences for financial institutions and the financial system that affects the future availability of credit.75 It is unclear, however, if the share of household debt at risk of default may be enough to pose systemic risk to the financial system.76
In addition to impacts on current loans, CARES Act protections related to the credit reporting In addition to impacts on current loans, CARES Act protections related to the credit reporting
system may also impact consumers’ ability to access credit in the future, possibly in positive and system may also impact consumers’ ability to access credit in the future, possibly in positive and
negative ways. Consumers can harm their credit scores when they miss consumer loan payments, negative ways. Consumers can harm their credit scores when they miss consumer loan payments,
and lower credit scores can impact their access to future credit.and lower credit scores can impact their access to future credit.7377 Section 4021 of the CARES Act Section 4021 of the CARES Act
requires financial institutions to report to the credit bureaus that consumers are current on their requires financial institutions to report to the credit bureaus that consumers are current on their
credit obligations if they enter into an agreement to defer, forbear, modify, make partial payments, credit obligations if they enter into an agreement to defer, forbear, modify, make partial payments,
or get any other assistance on their loan payments from a financial institution and fulfil those or get any other assistance on their loan payments from a financial institution and fulfil those
requirements.requirements.7478 Before this law was enacted, lenders could choose whether to report loans in Before this law was enacted, lenders could choose whether to report loans in
forbearance as paid on time; with this law, the option is no longer voluntary for the lender.forbearance as paid on time; with this law, the option is no longer voluntary for the lender.75
79 Although this CARES Act protection Although this CARES Act protection ~~allows~~al ows consumers with loan forbearance agreements to consumers with loan forbearance agreements to
protect their on-time credit histories, the provision may also lead to some unintended protect their on-time credit histories, the provision may also lead to some unintended
consequences.consequences.7680 Financial institutions may find credit scores less predictive of whether a Financial institutions may find credit scores less predictive of whether a
consumer is currently creditworthy, in part due to deferrals being treated the same as on-time consumer is currently creditworthy, in part due to deferrals being treated the same as on-time
~~payments.77 This situation could make it more difficult for consumers to access new credit,~~
~~particularly those currently meeting their loan obligations.78~~
~~So far, most of the response to the COVID-19 pandemic in consumer debt markets has focused on~~
~~helping consumers make existing debt payments, rather than focusing on access to credit, as the~~
~~pandemic is ongoing. Evidence suggests that credit markets have already tightened and it may be~~
~~more difficult for consumers to access new credit now than before the pandemic. According to the~~
~~CFPB, new credit applications dropped dramatically between the first and last weeks of March~~

~~73 For more information on the credit reporting industry, see CRS Report R44125,~~ ~~Consumer Credit Reporting, Credit~~
~~Bureaus, Credit Scoring, and Related Policy Issues, by Cheryl R. Cooper and Darryl E. Getter.~~
~~74 The~~ 75 For more information on banks’ exposure to consumer loan defaults during the COVID-19 pandemic, see CRS Insight IN11336, Bank Exposure to COVID-19 Risks: Mortgages and Consum er Loans, by David W. Perkins and Raj Gnanarajah. For more information on banking developments during Q2 2020, see CRS Insight IN11500, COVID-19 Im pact on the Banking Industry: Conditions in the Second Quarter of 2020, by David W. Perkins and Raj Gnanarajah. For a broader overview of banking industry risks and policy responses during the COVID -19 pandemic, see CRS Report R46422, COVID-19 and the Banking Industry: Risks and Policy Responses, coordinated by David W. Perkins. 76 A Wells Fargo report estimates that approximately 6% of household debt outstanding may be at risk. See Jay Bryson, T im Quinlan, and Shannon Seery, Household Debt at Risk Am id Job Losses, Wells Fargo Securities, Economics Group: Special Commentary, August 26, 2020, at https://www.wellsfargo.com/com/insights/economics/special-reports/. 77 For more information on the credit reporting industry, see CRS Report R44125, Consumer Credit Reporting, Credit Bureaus, Credit Scoring, and Related Policy Issues, by Cheryl R. Cooper and Darryl E. Getter. 78 T he covered period for this section starts on January 31, 2020, and extends to the later of 120 days after enactment or covered period for this section starts on January 31, 2020, and extends to the later of 120 days after enactment or
120 days after the national emergency declared by the President on March 13, 2020, terminates. If the consumer were 120 days after the national emergency declared by the President on March 13, 2020, terminates. If the consumer were
delinquent before the covered period, then the furnisher woulddelinquent before the covered period, then the furnisher would maintain the delinquent status unlessmaintain the delinquent status unless the consumer the consumer
bringsbrings the account or obligation current. For more information, see CFPB, the account or obligation current. For more information, see CFPB, ~~Statement~~Statem ent on Supervisory and ~~Enforcement~~Enforcem ent
Practices Regarding the Fair Credit ~~Reporting~~ Reporting Act and Regulation V in Light of the CARES Act, April 1, 2020, at , April 1, 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_credithttps://files.consumerfinance.gov/f/documents/cfpb_credit -reporting-policy-statement_cares-act_2020-04.pdf. -reporting-policy-statement_cares-act_2020-04.pdf.
7579 Some consumers may still experience harm to their credit record because Some consumers may still experience harm to their credit record because the CARESthe CARES Act does not give consumers a Act does not give consumers a
right to be granted forbearance for many types of consumer loans. Although many financial institutions have right to be granted forbearance for many types of consumer loans. Although many financial institutions have
announced efforts to provide assistance to affected consumers, lenders have discretion whether to enter into an announced efforts to provide assistance to affected consumers, lenders have discretion whether to enter into an
assistance agreement with an individualassistance agreement with an individual consumer. consumer. ~~Therefore~~T herefore, the ability of consumers to protect their credit scores , the ability of consumers to protect their credit scores
couldcould vary. Before the CARESvary. Before the CARES Act passed, lenders had various options to mitigate the impact on consumers’ credit Act passed, lenders had various options to mitigate the impact on consumers’ credit
scores and future credit accessscores and future credit access following disastersfollowing disasters or catastrophic events. For example, furnishers may use special or catastrophic events. For example, furnishers may use special
codes to report delinquencies duecodes to report delinquencies due to special circumstances. Seeto special circumstances. See CFPB,CFPB, Natural Disasters and Credit Reporting:
Quarterly ~~Consumer~~Consum er Credit Trends, November 2018, at https://files.consumerfinance.gov/f/documents/bcfp_quarterly-, November 2018, at https://files.consumerfinance.gov/f/documents/bcfp_quarterly-
consumer-credit-trends_report_2018-11_natural-disaster-reporting.pdf. In addition, if lenders and consumers enter into consumer-credit-trends_report_2018-11_natural-disaster-reporting.pdf. In addition, if lenders and consumers enter into
loan forbearance agreements, then furnishers have the option to report to the credit bureaus that these consumers are loan forbearance agreements, then furnishers have the option to report to the credit bureaus that these consumers are
current on their credit obligations. current on their credit obligations.
7680 Section 4021 of the CARES Section 4021 of the CARES Act requiresAct requires loan forbearances to be reported to the credit bureausloan forbearances to be reported to the credit bureaus in the same way, but in the same way, but
“it does not address“it does not address how model developers or individualhow model developers or individual lenders treat any particular variables or information on the lenders treat any particular variables or information on the
back end.” Seeback end.” See FinRegLab,FinRegLab, Covid-19 Credit Reporting & Scoring Update, Research Brief, July, Research Brief, July 2020, 2020,
https://finreglab.org/wp-content/uploads/2020/07/FinRegLab-Research-Brief-Covid-19-Credit-Reporting-Scoring-https://finreglab.org/wp-content/uploads/2020/07/FinRegLab-Research-Brief-Covid-19-Credit-Reporting-Scoring-
Update.pdf (hereinafter FinRegLab, Update.pdf (hereinafter FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020). , July 2020).
~~77 Current macroeconomic uncertainties may also make credit scores less predictive of future consumer defaults. See~~
~~AnnaMaria Andriotis, “‘Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t Tell Who’s~~
~~Creditworthy,” Wall Street Journal, June 29, 2020.~~
~~78 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7.~~
~~Congressional Research Service~~
16

~~COVID-19: Household Debt during the Pandemic~~

~~2020, as “auto loan inquiries dropped by 52 percent ... new mortgage inquiries dropped by 27~~
~~percent, and revolving credit card inquiries declined by 40 percent.”79 According to the Federal~~

~~79 Éva Nagypál, Christa Gibbs, and Scott Fulford,~~ ~~The Early Effects of the COVID-19 Pandemic on Credit~~
~~Applications, CFPB, CFPB Office of Research Special Issue Brief, April 2020, p. 1, at~~
~~https://www.consumerfinance.gov/data-research/research-reports/covid-19-early-effects-credit-applications/.~~
~~Congressional Research Service~~
17

~~COVID-19: Household Debt during the Pandemic~~

~~Reserve’s senior loan officer survey in July~~Congressional Research Service 16 COVID-19: Household Debt During the Pandemic payments.81 This situation could make it more difficult for consumers to access new credit, particularly those currently meeting their loan obligations.82 So far, most of the response to the COVID-19 pandemic in consumer debt markets has focused on helping consumers make existing debt payments, rather than focusing on access to credit, as the pandemic is ongoing. Evidence suggests that credit markets have already tightened and it may be more difficult for consumers to access new credit now than before the pandemic. According to the CFPB, new credit applications dropped dramatical y between the first and last weeks of March 2020, as “auto loan inquiries dropped by 52 percent ... new mortgage inquiries dropped by 27 percent, and revolving credit card inquiries declined by 40 percent.”83 According to the Federal Reserve’s senior loan officer survey in the summer and fal of 2020, banks tightened credit standards for , banks tightened credit standards for ~~all~~ al types of types of
household lending, including mortgages, credit cards, and auto loans.household lending, including mortgages, credit cards, and auto loans.80 84 Therefore, consumers Therefore, consumers
may have needed higher credit scores, larger down payments, or other more stringent may have needed higher credit scores, larger down payments, or other more stringent
requirements to qualify for new credit. In addition, in the credit card market, although evidence requirements to qualify for new credit. In addition, in the credit card market, although evidence
suggests limited reductions in credit card limits, the COVID-19 pandemic has suggests limited reductions in credit card limits, the COVID-19 pandemic has ~~likely~~ likely led to more led to more
credit card account closures and fewer credit-limit increases.credit card account closures and fewer credit-limit increases.8185 While some creditors may be While some creditors may be
tightening standards across the board over concerns that mandatory credit reporting provisions tightening standards across the board over concerns that mandatory credit reporting provisions
may result in inaccurate assessments of credit risk,may result in inaccurate assessments of credit risk,8286 others argue that broader macroeconomic others argue that broader macroeconomic
uncertainties may be driving this trend.uncertainties may be driving this trend.8387 For example, some lenders may be reluctant to make For example, some lenders may be reluctant to make
new loans given that many borrowers could new loans given that many borrowers could ~~still~~ stil be vulnerable to potential be vulnerable to potential job losses and need job losses and need
future forbearance, which generates costs for lenders. If limited access to credit continues, it future forbearance, which generates costs for lenders. If limited access to credit continues, it
could make it more difficult for consumers to buy homes, cars, or other large could make it more difficult for consumers to buy homes, cars, or other large purchases, harming purchases, harming
the economic recovery. the economic recovery.

Author Information

Cheryl R. Cooper, Coordinator Cheryl R. Cooper, Coordinator
Lida R. Weinstock Lida R. Weinstock
Analyst in Financial Economics Analyst in Financial Economics
Analyst in Macroeconomic Policy Maura Mullins Research Librarian 81 Current macroeconomic uncertainties may also make credit scores less predictive of future consumer defaults. See AnnaMaria Andriotis, “‘Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t T ell Who’s Creditworthy,” Wall Street Journal, June 29, 2020. 82 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7. 83 Éva Nagypál, Christa Gibbs, and Scott Fulford, The Early Effects of the COVID-19 Pandemic on Credit Applications, CFPB, CFPB Office of Research Special Issue Brief, April 2020, p. 1, at https://www.consumerfinance.gov/data-research/research-reports/covid-19-early-effects-credit -applications/. 84 ~~Analyst in Macroeconomic Policy~~

~~Maura Mullins~~

~~Research Librarian~~

~~Disclaimer~~
~~This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan~~
~~shared staff to congressional committees and Members of Congress. It operates solely at the behest of and~~
~~under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other~~
~~than public understanding of information that has been provided by CRS to Members of Congress in~~
~~connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not~~
~~subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in~~
~~its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or~~
~~material from a third party, you may need to obtain the permission of the copyright holder if you wish to~~
~~copy or otherwise use copyrighted material.~~

80 Board of Governors of the Federal Reserve System, Board of Governors of the Federal Reserve System, Senior Loan Officer Opinion Survey on Bank Lending Practices, ,
JulyJuly and October 2020, at https://www.federalreserve.gov/data/sloos 2020, at https://www.federalreserve.gov/data/sloos~~/sloos-202007~~.htm. .htm.
8185 Ryan Sandler Ryan Sandler and Judith Ricks, Householdand Judith Ricks, Household Debt and CreditDebt and Credit , August, August 2020, p. 3; and Larry Santucci, How Has2020, p. 3; and Larry Santucci, How Has the the
COVID-19 Pandemic Affected the Supply of Consumer Credit?: A Preliminary Look at the U.S. Credit CardCOVID-19 Pandemic Affected the Supply of Consumer Credit?: A Preliminary Look at the U.S. Credit Card Market, Market,
FederalFederal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, AugustReserve Bank of Philadelphia, Consumer Finance Institute Special Report, August 2020, p. 3, at 2020, p. 3, at
https://www.philadelphiafed.org/-/media/covid/cfi/cfi-credit-cards-and-covid-19.pdf. https://www.philadelphiafed.org/-/media/covid/cfi/cfi-credit-cards-and-covid-19.pdf.
8286 FinRegLab, FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7. , July 2020, p. 7.
8387 FinRegLab, FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 16. Congressional Research Service 17 COVID-19: Household Debt During the Pandemic Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. Congressional Research Service R46578 · VERSION 3 · UPDATED~~Covid-19 Credit Reporting & Scoring Update, July 2020, p. 16.~~
~~Congressional Research Service~~
~~R46578 · VERSION 1 · NEW~~
18 18