Personal bankruptcies are down, money problems have eased – so far | Payments Source
The extent to which the financial health of U.S. consumers has been boosted by pandemic relief efforts is becoming increasingly important. The question is, what will happen next?
The financial well-being of the average consumer improved between June 2019 and June 2020, as fewer people reported difficulty paying their bills and subjective levels of financial well-being increased, Consumer Financial Protection said on Friday. Office.
Meanwhile, bankruptcy filings fell 38% to 473,349 for the 12-month period ended March 31, the U.S. Courts Administrative Office said on Monday.
Both reports highlighted the positive impact of government payments, forbearance programs and declining consumer spending over the past 14 months. But the CFPB noted that much of the drop in spending meant people had cut back significantly on things like family visits and vacations.
“An overall improvement in the financial situation does not imply a more general improvement in the lives of consumers, especially against the tragedy of so many illnesses and deaths,” the office wrote.
The results are in line with other recent data, including quarterly bank profit reports which showed strong consumer credit quality. Some 96.8% of U.S. consumer debt was current in the fourth quarter of last year, its highest level in more than 17 years, according to data from the Federal Reserve Bank of New York.
But it’s unclear how long the positive trends will continue as government relief efforts halt and moratoriums on evictions and foreclosures end. Bankers have offered divergent views on when and at what level charges are likely to peak.
The CFPB reached its conclusions by examining data from credit bureaus and interviewing approximately 1,700 consumers. He calculated the Consumer Financial Well-Being Score, a measure developed by the agency in 2015 that asks respondents a series of subjective questions about their financial lives, then generates a score between 0 and 100.
While this score has generally remained stable over time, the CFPB said it increased by 1 point to 52.1 in June 2020. An increase of 1 point is associated with an increase in the age of five. , a credit score increase of 20 points or a household. revenue increase of about $ 15,000, according to the office.
Respondents who said they had money left at the end of the month rose 3.9 percentage points to 46.6%, while those who said finances were in control of their lives fell by 8 percentage points to 32.7%.
The bureau also found that consumers under 40 reported a significantly greater increase in their financial well-being than those over 62, although older consumers still had significantly higher financial well-being scores. higher.
As the financial health of some consumers deteriorated, forbearance programs have helped newly unemployed Americans avoid defaults, preventing an impact on their credit scores.
The bankruptcy data told a similar story.
In the four years leading up to the pandemic, the number of bankruptcy filings in the United States, including those filed by consumers and businesses, never fell below 750,000. But between April 1, 2020 and the same period a year later, it plunged to 473,000. Corporate bankruptcy filings fell 13.9%.
The federal court system has attributed the bankruptcy trends to several factors, including lower spending, moratoriums on evictions and foreclosures, and the closure of courtrooms for in-person cases.