COVID-19: Household Debt During the
October 22, 2020
Pandemic
Cheryl R. Cooper,
The Coronavirus Disease 2019 (COVID-19) pandemic has had a large and persistent economic
Coordinator
impact across the United States. Fear of infection, social distancing, and stay-at-home orders
Analyst in Financial
prompted business closures and a severe decline in demand for travel, accommodations,
Economics
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
Maura Mullins
peak at 14.7% in April and has since fallen to 7.9% in September. Consequently, many
Research Librarian
Americans have lost income and faced financial hardship. Survey results suggest that since

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

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

relatively flat.
In addition, during the second quarter 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
to consumers entering into 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
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
time.
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
Security (CARES) Act (P.L. 116-136), 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
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
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.
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
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
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
Workers, Families, and Employers Assistance Act (S. 4318) in the Senate.
In addition, consumers’ future access to credit markets may become another risk factor. The congressional response to the
COVID-19 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
consumer spending could harm the economic recovery.

Congressional Research Service

COVID-19: Household Debt during the Pandemic

Introduction
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
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
employment and a loss of income in many U.S. households. However, consumers have generally
not fallen 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
Recession caused by the 2007-2009 financial crisis.
Many consumers having trouble paying their bills have received loan forbearance.3 Loan
forbearance plans are agreements between borrowers and lenders that allow borrowers to reduce
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
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,
which may have helped them pay their bills.
Policy responses to the economic impacts of the COVID-19 pandemic have likely prevented
many consumers from falling delinquent on their loans. Specifically, the Coronavirus Aid, Relief,
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
student loans (Section 3513).5 In addition to this legislative response, financial regulatory
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
COVID-19 pandemic began, many banks and credit unions have announced measures to offer
various forms of assistance to affected consumers.

1 For background on the Coronavirus Disease 2019 (COVID-19), see CRS In Focus IF11421, COVID-19: Global
Implications and Responses, by Sara M. Tharakan et al.
2 For background on the potential economic effects of the COVID-19 pandemic in the United States, see CRS Insight
IN11388, COVID-19: U.S. Economic Effects, by Rena S. Miller and Marc Labonte.
3 For more information on consumer loan forbearance during the COVID-19 pandemic, including CARES Act rights to
forbearance, regulatory guidance, and impacts on consumers and financial institutions, see CRS Report R46356,
COVID 19: Consumer Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper; and CRS
Insight IN11359, COVID-19: Financial Relief and Assistance Resources for Consumers, by Maura Mullins and
Jennifer Teefy.
4 Loan forbearance agreements between consumers and financial institutions usually include a repayment plan, which
is an agreement allowing a defaulted borrower to repay the amount in arrears and become current on the loan according
to an agreed-upon schedule. Repayment plans take many shapes. For example, these plans may include a requirement
that all suspended payments are to be due at the end of the loan forbearance period; the past due amount is to be added
to the regular payment amount over the year after loan forbearance ends; or payments are to be added to the end of the
loan’s term. Interest or fees may or may not accrue during the loan forbearance period.
5 For a summary of CARES Act provisions aimed broadly at stabilizing the economy and helping affected households
and businesses, see CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116-136), coordinated by Andrew
P. Scott.
6 Many financial regulatory agencies have updated their guidance to help financial firms support consumer needs
during this time. Regulatory guidance does 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.
Congressional Research Service
1

link to page 6 COVID-19: Household Debt during the Pandemic

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
support in the form of enhanced unemployment insurance and relief checks phased out for higher-
income taxpayers (called Economic Impact Payments), among other things.7 These income
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.
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, followed by a discussion of
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 to support households during the economic recession. Lastly, the report discusses the
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
unemployment, which peaked at 14.7% in April and has since fallen to 7.9% in September.8
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
have lost income and faced financial hardship due to the impact of the pandemic.10
Survey results suggest that since March 2020, half of all adults live in a household that has lost
some employment income.11 Figure 1 shows select results from the Federal Reserve Bank of
Philadelphia’s COVID-19 Survey of Consumers, an online survey conducted to gather
information from respondents about income, employment, and financial security during the
COVID-19 pandemic. So far, the survey has been administered in four waves during April, May,
June, and July 2020. In the first wave of the survey, conducted in April, 39.2% of respondents
indicated a reduction in personal income, or no income, as a result of the pandemic.12 Waves 2, 3,
and 4 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 CARES Act, see CRS Insight IN11282, COVID-19
and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates/Economic Impact Payments in the CARES
Act (P.L. 116-136), by Margot L. Crandall-Hollick.
8 Bureau of Labor Statistics, The Employment Situation—September 2020, October 2, 2020, at https://www.bls.gov/
news.release/pdf/empsit.pdf. For more background on how unemployment is calculated and other related economic
concepts, see CRS In Focus IF10443, Introduction to U.S. Economy: Unemployment, by Lida R. Weinstock.
9 The official unemployment rates are possibly underestimates as well—the Bureau of Labor Statistics reported a likely
error in how respondents classified being furloughed. For more, see CRS Insight IN11456, COVID-19: Measuring
Unemployment, by Lida R. Weinstock.
10 For more information on financial industry policy issues during the COVID-19 pandemic for consumers having
trouble paying their bills, see CRS Insight IN11244, COVID-19: The Financial Industry and Consumers Struggling to
Pay Bills, by Cheryl R. Cooper.
11 For more information on income losses during the COVID-19 pandemic, see CRS Insight IN11457, COVID-19
Pandemic’s Impact on Household Employment and Income, by Gene Falk.
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, at
https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave4-updates.pdf, see Table
4—Impact to personal Income (hereinafter Federal Reserve Bank of Philadelphia, “COVID-19 Survey of Consumers—
Wave 4” 2020, see Table 4).
Congressional Research Service
2

link to page 6

COVID-19: Household Debt during the Pandemic

a reduction in personal income, or no income, decreased to 35.8%, 32.7%, and 32.1%,
respectively.13
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
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
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
ends meet over the next 12 months, 27.8% of respondents in April indicated feeling significantly
less secure than they did prior to the crisis; see Figure 1.15 Responses to this question about
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
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
respondents about their ability to make ends meet in the next 12 months.16
Figure 1. Percentage of Households Reporting Lost Income and Significantly Less
Financial Security Since COVID-19 Crisis
April, May, June, and July 2020

Source: Federal Reserve Bank of Philadelphia, Consumer Finance Institute’s Special Report, COVID-19 Survey
of Consumers—Wave 4, at https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-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.
14 Board of Governors of the Federal Reserve, Report on the Economic Well-Being of U.S. Households in 2019,
Featuring Supplemental Data from April 2020, May 2020, pp. 2-3, at https://www.federalreserve.gov/publications/
files/2019-report-economic-well-being-us-households-202005.pdf.
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, at
https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave4-updates.pdf, see Table
5—Financial Security and Outlook (hereinafter Federal Reserve Bank of Philadelphia, “COVID-19 Survey of
Consumers—Wave 4” 2020, see Table 5).
16 Federal Reserve Bank of Philadelphia, “COVID-19 Survey of Consumers—Wave 4” 2020, see Table 5.
Congressional Research Service
3

link to page 8 COVID-19: Household Debt during the Pandemic

updates.pdf, and https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave3-
updates.pdf, respectively.
The income loss from the COVID-19 pandemic may impact the ability of some families to pay
their loan obligations or other bills. Late loan payments can harm an individual’s credit score,
which could reduce their access to credit in the future. Severe delinquency can also eventually
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
COVID-19 pandemic income losses on household debt and delinquency.
Household Debt and Delinquency Trends
As of the second quarter of 2020, household debt totaled $14.3 trillion.17 By far, the largest type
of household debt was mortgage debt at $9.8 trillion.18 The second largest type of debt was
student loan debt totaling $1.5 trillion, followed by auto loan debt at $1.3 trillion, and credit card
debt at $817 billion.19 Figure 2 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
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
pandemic. After peaking in 2008, total household debt gradually decreased over a period of
nearly five years until the middle of 2013, at which time household debt began increasing again.

17 Federal Reserve Bank of New York, Household Debt and Credit (Based on New York Fed Consumer Credit Panel),
Center for Microeconomic Data, Q2 2020, at https://www.newyorkfed.org/microeconomics/hhdc/background.html
(hereinafter Federal Reserve Bank of New York, Household Debt and Credit, Q2 2020). For an overview of consumer
financial markets, see CRS Report R45813, An Overview of Consumer Finance and Policy Issues, by Cheryl R.
Cooper.
18 Federal Reserve Bank of New York, Household Debt and Credit, Q2 2020.
19 Federal Reserve Bank of New York, Household Debt and Credit, Q2 2020.
Congressional Research Service
4

COVID-19: Household Debt during the Pandemic

Figure 2. Total Household Debt and Its Composition
1st Quarter 2006 – 2nd Quarter 2020

Source: New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/
background.html.
Notes: The data are inflation-adjusted to 2020Q2 dol ars. HE revolving debt refers to home equity lending.
Economic recessions are shaded in the graph.
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
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.
As of the second quarter of 2020, the pandemic had affected different types of aggregate
household debt balances differently. Notably, credit card balances declined sharply by about $76
billion, the largest quarterly decline on record.20 By contrast, there were slight increases in
mortgage debt balances, but other household debt balances remained relatively flat in the second
quarter 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
Financial Protection Bureau (CFPB) finds credit card balance declines “across all groups,
including consumers residing in both high- and low-income census tracts,” possibly due to a
decline in consumer spending.23Despite many Americans losing income, consumers have

20 Federal Reserve Bank of New York, Household Debt and Credit, Q2 2020.
21 Andrew F. Haughwout et al., A Monthly Peek into Americans’ Credit During the COVID-19 Pandemic, Federal
Reserve Bank of New York, Liberty Street Economics, August 6, 2020, at
https://libertystreeteconomics.newyorkfed.org/2020/08/a-monthly-peek-into-americans-credit-during-the-covid-19-
pandemic.html.
22 Jeanna Smialek, “Credit Card Debt Plunges, Driving a Decline in Overall Household Debt,” New York Times,
August 6, 2020.
23 Ryan Sandler and Judith Ricks, The Early Effects of the COVID-19 Pandemic on Consumer Credit, Consumer
Congressional Research Service
5

link to page 9

COVID-19: Household Debt during the Pandemic

generally not fallen delinquent on their loan obligations. This pattern is unlike during other
economic recessions, such as the 2007-2009 Great Recession. In the second quarter of 2020, the
percentage of delinquent loans declined in most consumer debt markets. Figure 3 shows the
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
increased during the Great Recession, a similar pattern is not observed during the COVID-19
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 fell.
Some of this decline is due to consumers entering into loan forbearance agreements (discussed in
the next section).
Figure 3. Percentage of Delinquent Loans (30+ Days Late) by Loan Type:
1st Quarter 2006 – 2nd Quarter 2020

Source: New York Fed Consumer Credit Panel/Equifax, at https://www.newyorkfed.org/microeconomics/hhdc/
background.html.
Notes: HE revolving debt refers to home equity lending. Economic recessions are shaded in the graph.
Consumer Loan Forbearance Trends
Many consumers who would likely have experienced difficulty repaying their loans received loan
forbearance.24 Loan forbearance plans can prevent a consumer from becoming delinquent, giving
the consumer time to repay the debts owed rather than potentially experiencing adverse

Financial Protection Bureau (CFPB), CFPB Office of Research Special Issue Brief, August 2020, p. 3, at
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, Household Debt and Credit, August 2020).
24 For more information on consumer loan forbearance during the COVID-19 pandemic, including CARES Act rights
to forbearance, regulatory guidance, and impacts on consumers and financial institutions, see CRS Report R46356,
COVID 19: Consumer Loan Forbearance and Other Relief Options, coordinated by Cheryl R. Cooper; and CRS
Insight IN11359, COVID-19: Financial Relief and Assistance Resources for Consumers, by Maura Mullins and
Jennifer Teefy.
Congressional Research Service
6

link to page 11 COVID-19: Household Debt during the Pandemic

consequences, such as credit score declines, debt collection, or foreclosure. As previously
mentioned, the CARES Act established consumer rights to be granted forbearance for federally
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
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
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
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.
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
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
crisis.25 Not all of these consumers reported receiving the financial assistance they requested;
about a quarter of respondents reported not receiving a requested deferral.26
Many mortgage borrowers entered loan forbearance at the beginning of the COVID-19 pandemic.
According to Mortgage Bankers Association’s (MBA’s) Forbearance and Call Volume Survey,
the percentage of single-family mortgage loans estimated to be in forbearance as of the beginning
of September was 7.0%.27 Before the pandemic, the proportion of mortgage loans in forbearance
was relatively small. According to the MBA, the total share of loans in forbearance increased
from 0.25% to 2.66% between March 2 and April 1, 2020.28 At the beginning of April, following
the passage of the CARES Act, MBA initiated a weekly survey of forbearance and call reporting.
Figure 4 shows the share of mortgage loans in forbearance each week starting in early April
through the end of September. The reported percentage of mortgages in forbearance increased in
April and May, reaching a high of 8.55% as of June 7, 2020.29 Since mid-June, the share of
mortgage loans in forbearance has generally decreased each week, although it remains much
higher than before the pandemic.

25 Federal Reserve Bank of Philadelphia, “COVID-19 Survey of Consumers,” Consumer Finance Institute’s Special
Report, May 2020, pp. 8, 20, at https://www.philadelphiafed.org/-/media/covid/cfi/cfi-covid-19-survey-of-
consumers.pdf (hereinafter Federal Reserve Bank of Philadelphia, “COVID-19 Survey of Consumers,” 2020).
26 Federal Reserve Bank of Philadelphia, “COVID-19 Survey of Consumers,” 2020, p. 20.
27 Mortgage Bankers Association (MBA), “Share of Mortgage Loans in Forbearance Declines to 7.01%,” press release,
September 14, 2020, at https://www.mba.org/2020-press-releases/september/share-of-mortgage-loans-in-forbearance-
declines-to-701.
28 MBA, “MBA Survey Shows Spike in Loans in Forbearance, Servicer Call Volume,” 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.
29 MBA, “Share of Mortgage Loans in Forbearance Increases to 8.55%,” press release, June 15, 2020, at
https://www.mba.org/2020-press-releases/june/share-of-mortgage-loans-in-forbearance-increases-to-855.
Congressional Research Service
7

COVID-19: Household Debt during the Pandemic

Figure 4. Weekly Share of Mortgage Loans in Forbearance
April – September 2020

Source: Mortgage Bankers Association’s (MBA) Weekly Forbearance and Call Volume Survey. See also MBA’s
press releases for survey highlights, at https://www.mba.org/search/press-release-search?keywords=forbearance&
start=0&rows=10.
Notes: MBA’s weekly survey covers more than three quarters of first-lien mortgages.
Forbearance increased not only for mortgage loans but for other consumer credit products as well.
The Trump Administration has set the federal student loan interest rate to zero, and borrowers will
not be required to make payments due on their loans through the end of 2020, effectively putting
all of these loans automatically in forbearance.30 Loan forbearance also rose in auto loan and
credit card markets, where consumers do not have a right in the CARES Act to forbearance.
However, many lenders may still 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
credit card loans in forbearance increased from about 1.5% in February 2020 to about 3.5% in
June 2020.31 In addition, payment assistance was “more likely to be reported for borrowers

30 Section 3513 of the CARES Act suspends 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
September 30, 2020. On August 8, 2020, President Trump directed the Department of Education to extend the “waiver
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 CRS Report R46314, Federal Student Loan Debt Relief in the Context
of COVID-19, by Alexandra Hegji.
31 The CFPB calculates payment assistance “as an account being reported with a zero scheduled payment due despite a
positive balance.” The 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] as it does with the incidence of actual
assistance.” Ryan Sandler and Judith Ricks, Household Debt and Credit, August 2020, pp. 13-15. Other sources
calculate estimates differently than the CFPB, and report different percentages. For example, Transunion creates a
broader metric called “accounts in hardship,” which includes loans “affected by natural/declared disaster, accounts
reported as in forbearance, accounts reported as deferred or payment due amount removal, or freezing of account status
and/or past due amount.” Transunion reports 7.2% of auto accounts and 3.6% of credit card loans in hardship in June
2020. See Transunion, Monthly Industry Snapshot: Financial Services, at https://www.transunion.com/monthly-
industry-snapshot-fs.
Congressional Research Service
8

COVID-19: Household Debt during the Pandemic

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.”32
Household Debt Trends: Current Recession Compared with the Great Recession
The current recession created by the COVID-19 pandemic differs from the Great Recession caused by the 2007-
2009 financial crisis. Although the pandemic has caused lost income and financial insecurity, mortgage borrowers’
household finances were generally stronger in light of stricter lending standards over the last several years.33 For
example, families have less mortgage debt and more equity in their homes. During the Great Recession, many
families lost equity in their homes resulting from low- or zero-down payment requirements and falling home
values. According to the Case-Shil er U.S. National Home Price Index, home prices across the United States fell
more than 25% on average between the peak and the bottom of the housing bubble.34 This led to many
foreclosures, which destabilized local house prices and harmed local communities. In contrast, house prices have
not fallen during the COVID-19 pandemic.35
Loan forbearance may be a more viable solution for families having trouble paying their mortgages during the
COVID-19 pandemic than during the Great Recession, because families have equity in their homes. According to
Black Knight estimates, only 9% of borrowers in forbearance have less than 10% of equity in their homes, and
almost 80% have at least 20% equity in their homes, suggesting that relatively few mortgage borrowers may be at
risk for foreclosure at the moment.36 Borrowers with equity in their homes can avoid foreclosure through loan
forbearances, mortgage refinancing, or if no longer affordable, selling the home; borrowers with negative equity
may not have these options.37 During the Great Recession, by contrast, falling home prices meant that many
families had negative equity, and therefore were more at risk of foreclosure.38
Student and auto loan debt, however, are higher now for most households than during the Great Recession. The
federal government owns most student loan debt in the United States, and these loans have been effectively in
loan forbearance during the pandemic, thus consumers 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
loans were made to subprime consumers who may be more likely to have trouble paying these loans back due to
the economic downturn.39 However, increased demand for used vehicles during the COVID-19 pandemic may
limit potential credit losses in this market, by allowing some consumers the option to sell their cars rather than
becoming delinquent on their auto loans.40

32 Ryan Sandler and Judith Ricks, Household Debt and Credit, August 2020, p. 3.
33 See CRS InFocus CRS In Focus IF11413, The Qualified Mortgage (QM) Rule and the QM Patch, by Darryl E.
Getter.
34 S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA], retrieved from
FRED, Federal Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA.
35 S&P Dow Jones Indices LLC, S&P/Case-Shiller U.S. National Home Price Index [CSUSHPINSA], retrieved from
FRED, Federal Reserve Bank of St. Louis, at https://fred.stlouisfed.org/series/CSUSHPINSA.
36 Black Knight, Black Knight’s August 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
Risk, October 5, 2020, p.16, at https://www.blackknightinc.com/black-knights-august-2020-mortgage-monitor/.
37 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
servicing, see CRS Insight IN11377, Mortgage Servicing Rights and Selected Market Developments, by Darryl E.
Getter.
38 For more information on the policy issues related to foreclosure and mortgage loan modifications, see CRS Report
R40210, Preserving Homeownership: Foreclosure Prevention Initiatives, by Katie Jones.
39 Jean Eaglesham and Ken Brown, “Auto-Lending Binge Threatens to Unwind When Stimulus Measures Ease,” Wall
Street Journal, August 7, 2020, at https://www.wsj.com/articles/auto-lending-binge-threatens-to-unwind-when-
stimulus-measures-ease-11596798003.
40 Nathan Bomey, “Used Car Prices Spiking as COVID-19 Pandemic Shakes up the Market for New Cars,” USA
Today, August 5, 2020, at https://www.usatoday.com/story/money/cars/2020/08/05/car-prices-coronavirus-pandemic-
new-trucks-suvs/3297869001/.
Congressional Research Service
9

COVID-19: Household Debt during the Pandemic

Policy Impacts on Household Finances
The initial economic policy response to the COVID-19 pandemic was swift and large, as
compared with that of previous recessions.41 This response to the economic impacts of the
pandemic have likely prevented many consumers from falling delinquent on their loan payments.
This section highlights two important policy impacts that influenced these trends: consumer loan
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,
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
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
institutions, government-sponsored enterprises (GSEs), and the federal government—are subject
to different laws, regulations, and business considerations. As mentioned earlier, the CARES Act
establishes consumer rights to be granted forbearance for federally backed mortgages for up to a
year (Section 4022) and for federal student loans (Section 3513), now through the end of 2020
due to administrative actions.42 The law also protects the credit histories of consumers with
forbearance agreements until 120 days after the national emergency declared by the President on
March 13, 2020, terminates (Section 4021).43 However, the act does not grant consumers loan
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
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
forbearance and other financial relief options for affected consumers.44 In response, many banks
and credit unions have announced measures to offer various forms of assistance to affected
consumers.

41 Romina Boccia and Justin Bogie, This Is How Big the COVID-19 CARES Act Relief Bill Is, The Heritage Foundation,
April 20, 2020, at https://www.heritage.org/budget-and-spending/commentary/how-big-the-covid-19-cares-act-relief-
bill.
42 For more information on Title IV of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act; P.L.
116-136), which contains a number of provisions aimed broadly at stabilizing the economy and helping affected
households and businesses, see CRS Report R46301, Title IV Provisions of the CARES Act (P.L. 116-136), coordinated
by Andrew P. Scott. For more information about federal student loan debt relief in the context of COVID-19, see CRS
Report R46314, Federal Student Loan Debt Relief in the Context of COVID-19, by Alexandra Hegji.
43 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.
44 Many financial regulatory agencies have updated their guidance to help financial firms support consumer needs
during this time. Regulatory guidance does 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. For more information
on mortgage and bank regulators’ responses to COVID-19, see CRS Insight IN11316, COVID-19: Support for
Mortgage Lenders and Servicers, by Andrew P. Scott and Darryl E. Getter; and CRS Insight IN11278, Bank and
Credit Union Regulators’ Response to COVID-19, by Andrew P. Scott and David W. Perkins. In
addition, the Federal Reserve has provided liquidity to support financial markets in response to COVID-19. For more
information, see CRS Insight IN11259, Federal Reserve: Recent Actions in Response to COVID-19, by Marc Labonte.
Congressional Research Service
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
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.45 Therefore, many Americans may
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 allow the
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
needed financial relief.
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
fall 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
difficult for them to access these benefits.46 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
right to mortgage forbearance for federally backed mortgages and fewer were aware of the credit
reporting accommodations.47
Fiscal Policy Responses
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
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
pandemic. For example, evidence 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 held or
insured by the federal government are not reported by age of mortgage borrower.
46 Douglas Duncan, COVID-19: The Need for Consumer Outreach and Home Purchase/Financing Digitization, Fannie
Mae, Perspectives Blog, August 12, 2020, at https://www.fanniemae.com/research-and-insights/perspectives/covid-19-
need-consumer-outreach-and-home-purchasefinancing-digitization.
47 Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, CFI COVID-19 Survey of
Consumers—Wave 3 Reveals Improvements, but Not for Everyone,” pp. 11-13, 31, at https://www.philadelphiafed.org/-
/media/covid/cfi/cfi-covid-19-survey-of-consumers-wave3-updates.pdf.
48 Chris Cunningham and Kris Gerardi, COVID-19 Mortgage Relief—The Role of Income Support, Federal Reserve
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.
Congressional Research Service
11

COVID-19: Household Debt during the Pandemic

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
unemployment benefits to some not normally eligible for unemployment insurance.49 Estimates
suggest that most workers received at least as much in benefits as they lost in wages.50
Following the expiration of the enhanced unemployment benefits at the end of July, President
Trump issued a memorandum on August 8, 2020, which called on his Administration to approve a
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.51
These unemployment benefits likely made it possible for some families with an unemployed
worker to pay their bills 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
individual and $500 per child, with amounts phased out for higher-income taxpayers.52 Payments
began in April 2020.53 According to the IRS, more than 160 million economic impact payments
were delivered by August 14, 2020.54 Economic impact payments constituted more than 12% of
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, US Unemployment Insurance Replacement Rates During the
Pandemic, University of Chicago, Becker Friedman Institute for Economics, Working Paper no. 2020-62, August 24,
2020.
51 U.S. President (Trump), “Memorandum on Authorizing the Other Needs Assistance Program for Major Disaster
Declarations Related to Coronavirus Disease 2019,” Weekly Compilation of Presidential Documents, August 8, 2020.
For more information on this memorandum, see CRS Legal Sidebar LSB10532, President Trump’s Executive Actions
on Student Loans, Wage Assistance, Payroll Taxes, and Evictions: Initial Takeaways, by Kevin M. Lewis, Sean M.
Stiff, and Jay B. Sykes.
52 For more information on the direct payments to individuals in the CARES Act, see CRS Insight IN11282, COVID-19
and Direct Payments to Individuals: Summary of the 2020 Recovery Rebates/Economic Impact Payments in the CARES
Act (P.L. 116-136), by Margot L. Crandall-Hollick.
53 U.S. Congress, House Committee on Ways and Means, Expected Timeline for Economic Impact Payments, 116th
Cong., April 16, 2020, at https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/
2020.04.16%20Rebate%20Payment%20Timeline%20FINAL.pdf.
54 Internal Revenue Service, “IRS takes new steps to ensure people with children receive $500 Economic Impact
Payments,” press release, August 14, 2020, at https://www.irs.gov/newsroom/irs-takes-new-steps-to-ensure-people-
with-children-receive-500-economic-impact-payments.
55 Bureau 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-
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

higher for those facing liquidity constraints, unemployed, living in larger households, less
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 growth in the U.S. economy. As happened with the
COVID-19 pandemic, significant drops in consumer spending can cause drops in aggregate demand (overall
spending), of which consumer spending is a significant component. Such a fall in aggregate demand wil generally
result in slower wage growth, decreased employment, lower business revenue, and lower business investment.
Lost jobs and wage income can cause more reductions in consumer spending, leading to a more severe recession.
Conventional macroeconomic theory generally supports the use of fiscal stimulus in the form of short-term
government spending increases or tax decreases designed to temporarily spur economic activity.57 According to
this theory, fiscal stimulus can mitigate the decline in aggregate demand, reduce employment gaps, and guide the
economy back to the ful -employment more quickly than would otherwise occur. Fiscal policy, such as taxes and
transfers, can directly support a household’s income. Fiscal policy also affects household income and spending
indirectly, through its effect on aggregate demand, leading to reduced unemployment and higher income. In these
ways, fiscal stimulus can help a household sustain its regular spending and more easily pay its loan obligations.
Future Household Finance Outlook
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.58
However, it is unclear whether this pattern will continue. Future economic projections look
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
the outlook for household debt and consumer credit markets. The first subsection describes
current macroeconomic uncertainties; the second subsection discusses the importance of future
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
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
the virus and social distancing measures make it unlikely that commerce can regain its pre-
pandemic pace while COVID-19 still poses a threat. Workers in certain industries, such as retail,
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 For more information on fiscal policy, see CRS In Focus IF11253, Introduction to U.S. Economy: Fiscal Policy, by
Lida R. Weinstock; and CRS Report R45723, Fiscal Policy: Economic Effects, by Marc Labonte.
58 Jon Prior, “PNC sees Steep Decline in Forbearance Requests. Will it Last?” American Banker, July 15, 2020; and
Jim Dobbs, “Big Banks Keeping Consumer Loan Losses in Check, at Least for Now,” American Banker, 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

more optimistic about the rate of recovery, although they also suggest that the effects of COVID-
19 on unemployment may be long lasting.60
Future Public Policy Uncertainty
Future public policy will affect the course of the economic recovery generally and developments
in household debt markets more specifically. Mortgage and student loan forbearance programs
are still in effect, but when these programs expire, some consumers may fall delinquent on their
loans. In addition, the July expiration of the CARES Act’s supplemental unemployment insurance
payments could also result in more consumers eventually being unable to stay current on their
loans. President Trump’s memorandum extends a lower supplemental payment for some
unemployed workers, but reports suggest that these supplemental payments started to expire as of
the end of August in some states.61 A recent research study suggests that in August, without the
benefit supplement, many unemployed workers may have depleted their savings and reduced
their spending.62
Some families losing unemployment insurance funds may have more trouble paying their
monthly consumer loan obligations with a reduced benefit.63 Industry reports suggest concerns
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

https://www.cbo.gov/publication/56442.
60 For example, see Board of Governors of the Federal Reserve System, FOMC Economic Projections, June 10, 2020,
at https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20200610.pdf; and Wall Street Journal, Economic
Forecasting Survey, June 1, 2020, at https://www.wsj.com/graphics/econsurvey/. For more information on the current
unemployment rate outlook, and what those changes would mean for the economy, see CRS Insight IN11460, COVID-
19: How Quickly Will Unemployment Recover?, by Lida R. Weinstock.
61 Jeff Stein and Eli Rosenberg, “Trump’s $300 Unemployment Funding is Already Running Out, Leaving Millions in
Crisis Again,” Washington Post, September 11, 2020; and Elisabeth Buchwald, “More than 30 States are Preparing to
Distribute an Extra $300 in Unemployment Benefits—But How Long Will that Last?” MarketWatch, August 31, 2020
at https://www.marketwatch.com/story/more-than-30-states-have-distributed-an-extra-300-in-unemployment-benefits-
but-how-long-will-that-last-2020-08-27.
62 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/
dam/jpmc/jpmorgan-chase-and-co/institute/pdf/Institute-UI-Benefits-Boost-Policy-Brief_ADA.pdf.
63 Economists from Goldman Sachs estimated that the expiration of the $600 supplemental payment could result in a
$70 billion hit to personal income in August, with the additional $300 benefit possibly covering up to $35 billion of
that, if fully implemented in August. If personal income was lowered by the full $70 billion, economists estimate this
would translate to a reduction in consumer spending power by about 6.5% of personal consumption expenditures (PCE)
in August. Blake Taylor, “US Daily: The New $300 Benefit: Too Little Too Late for August Spending,” Goldman
Sachs Economics Research, 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

 the Heroes Act (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
 the American Workers, Families, and Employers Assistance Act (S. 4318) in the
Senate, which was introduced on July 27, 2020.
Both bills include additional relief payments to individuals67 and additional unemployment
insurance benefits.68 In addition, the Heroes Act would expand consumer rights to loan
forbearance and other payment relief during the COVID-19 pandemic.69
Consumer Credit Market Uncertainty
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,
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
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
garnishment.
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
voluntarily extending loan forbearance becomes a less viable option. Questions exist about
whether deferrals will become current or whether they will eventually need to be charged off.70
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

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
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.73 Section 4021 of the CARES Act
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,
or get any other assistance on their loan payments from a financial institution and fulfil those
requirements.74 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.75
Although this CARES Act protection allows consumers with loan forbearance agreements to
protect their on-time credit histories, the provision may also lead to some unintended
consequences.76 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
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 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
delinquent before the covered period, then the furnisher would maintain the delinquent status unless the consumer
brings the account or obligation current. For more information, see CFPB, Statement on Supervisory and Enforcement
Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act, April 1, 2020, at
https://files.consumerfinance.gov/f/documents/cfpb_credit-reporting-policy-statement_cares-act_2020-04.pdf.
75 Some consumers may still experience harm to their credit record because the CARES Act does not give consumers a
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
assistance agreement with an individual consumer. Therefore, the ability of consumers to protect their credit scores
could vary. Before the CARES Act passed, lenders had various options to mitigate the impact on consumers’ credit
scores and future credit access following disasters or catastrophic events. For example, furnishers may use special
codes to report delinquencies due to special circumstances. See CFPB, Natural Disasters and Credit Reporting:
Quarterly Consumer Credit Trends, 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
loan forbearance agreements, then furnishers have the option to report to the credit bureaus that these consumers are
current on their credit obligations.
76 Section 4021 of the CARES Act requires loan forbearances to be reported to the credit bureaus in the same way, but
“it does not address how model developers or individual lenders treat any particular variables or information on the
back end.” See FinRegLab, Covid-19 Credit Reporting & Scoring Update, Research Brief, July 2020,
https://finreglab.org/wp-content/uploads/2020/07/FinRegLab-Research-Brief-Covid-19-Credit-Reporting-Scoring-
Update.pdf (hereinafter FinRegLab, Covid-19 Credit Reporting & Scoring Update, 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, banks tightened credit standards for all types of
household lending, including mortgages, credit cards, and auto loans.80 Therefore, consumers
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
suggests limited reductions in credit card limits, the COVID-19 pandemic has likely led to more
credit card account closures and fewer credit-limit increases.81 While some creditors may be
tightening standards across the board over concerns that mandatory credit reporting provisions
may result in inaccurate assessments of credit risk,82 others argue that broader macroeconomic
uncertainties may be driving this trend.83 For example, some lenders may be reluctant to make
new loans given that many borrowers could still be vulnerable to potential job losses and need
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 purchases, harming
the economic recovery.

Author Information

Cheryl R. Cooper, Coordinator
Lida R. Weinstock
Analyst in Financial Economics
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, Senior Loan Officer Opinion Survey on Bank Lending Practices,
July 2020, at https://www.federalreserve.gov/data/sloos/sloos-202007.htm.
81 Ryan Sandler and Judith Ricks, Household Debt and Credit, August 2020, p. 3; and Larry Santucci, How Has the
COVID-19 Pandemic Affected the Supply of Consumer Credit?: A Preliminary Look at the U.S. Credit Card Market,
Federal Reserve Bank of Philadelphia, Consumer Finance Institute Special Report, August 2020, p. 3, at
https://www.philadelphiafed.org/-/media/covid/cfi/cfi-credit-cards-and-covid-19.pdf.
82 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 7.
83 FinRegLab, Covid-19 Credit Reporting & Scoring Update, July 2020, p. 16.
Congressional Research Service
R46578 · VERSION 1 · NEW
18