Consumer Credit Snapshot Shows Fewer Accounts In Financial Hardship Since Last Year

Stressed married couple looking frustrated, having no money to pay off their debts, managing family budget together

DISCLAIMER: As the COVID-19 public health situation evolves, new regulations are being continually issued. This page/story/information may not include the most recent information.

Katie Jensen JUN 23, 2021 

In May of 2020, 7.48% of financial hardship accounts represented mortgage delinquencies. A year later, only 4.07% represented mortgage delinquencies.

The May 2021 Consumer Credit Snapshot shows that accounts in “financial hardship” status dropped significantly compared to one year ago. The snapshot examines the status of financial hardship programs entered into by consumers for credit products, including auto loans, credit cards, and mortgages.

In May of 2020, 7.48% of financial hardship accounts represented mortgage delinquencies; a year later, only 4.07% represented mortgage delinquencies. Still, mortgages make up the largest percentage of financial hardship accounts.

The pandemic put a lot of families and working people in financial hardship, either by preventing them from working or curbing their income. The total amount of accounts in financial hardship status showed a considerable increase from March 2020 to May 2020, the early months of the pandemic. However, the May 2021 Consumer Credit Snapshot shows that the amount of these accounts dramatically decreased since last year.

TransUnion’s research found that 70% of non-prime consumers and 80% of prime and above consumers made payments on hardship accounts while they were enrolled in such programs. Additionally, more than 40% of accounts in these programs exited within the first three months of entering. (Risk ranges for non-prime= 300-660; prime= 661-720; prime and above= 661-850.)

“Traditionally, enrollment in a financial hardship program signified heightened consumer risk,” said Jason Laky, executive vice president of financial services at TransUnion. “In the era of COVID-19, however, the consumer makeup of those accessing hardship programs has been much more diverse in terms of credit profiles. As things stabilize, we’ve found that consumers who exhibited key credit behaviors within the first three months of accessing an accommodation program performed well over the long-term.”

Those who exited on all of their hardship accounts by month three were at a lower risk than those who were enrolled in the program longer. They were also less likely to experience continued struggles and leverage financial accommodations again.

Roughly 80% of these “early exiters” stayed out of hardship programs nine months later. Prime and above hardship consumers did exceptionally well with significantly lower delinquency rates if they exited the hardship program early. In comparison to non-prime consumers, they fared much better.

“The consumers who enrolled in hardship programs and exited early or continued to make payments on accounts overwhelmingly used the programs for their intended purpose. Not only were these consumers much less likely to go delinquent, but they were also able to get a leg up during a difficult situation,” said Matt Komos, vice president of research and consulting at TransUnion.“Lenders, banks and various financial institutions across the financial services landscape extended accommodations to consumers to help them withstand the challenges brought on by the pandemic.”


Michigan license number:   DM-0016282 Available to the public and licensed in Michigan.

Section 13(1)  When a licensee establishes a debt management plan for a debtor, the licensee may charge and receive an initial fee of $50.00

Section 13(2)  A licensee shall attempt to obtain consent to participate in a debt management plan from at least 51%, in number or dollar amount, of the debtor’s creditors within 90 days after establishing the debt management plan. If the required consent is not actually received by the licensee, the licensee shall provide notice to the debtor of the lack of required consent and the debtor may, at its option, close the account. If the debtor decides to close the account, any unexpended funds shall be returned to the debtor or disbursed as directed by the debtor.

Sec. 14. (1) A contract between a licensee and debtor shall include all of the following:

(a) Each creditor to which payments will be made and the amount owed each creditor. A licensee may rely on records of the debtor and other information available to it to determine the amount owed to a creditor.

(b) The total amount of the licensee’s charges.

(c) The beginning and termination dates of the contract.

(d) The principal amount and approximate interest charges of the debtor’s obligations to be paid under the debt management plan.

(e) The name and address of the licensee and of the debtor.

(f) Any other provisions or disclosures that the director determines are necessary for the protection of the debtor and the proper conduct of business by a licensee.

Sec. 18. (1) In addition to the fee described in section 13(1), a licensee may charge a reasonable fee for providing debt management services under a debt management plan. The fee under this subsection shall not exceed 15% of the amount of the debt to be liquidated during the express term of the plan.

(2) A licensee may offer a debtor the option to purchase credit reports or educational materials and products, and charge a fee to the debtor if the debtor elects to purchase any of those items from the licensee.  Fees charged under this subsection are not subject to the 15% limitation on fees described in subsection (1).

(3) Except for a cancellation described in subsection (4), in the event of cancellation of or default in the performance of the contract by the debtor before its successful completion, a licensee may collect $25.00 in addition to any fees and charges of the licensee previously received by the licensee. This $25.00 fee is not subject to the 15% limitation on fees and charges under subsection (1).

(4) A contract is in effect when it is signed by the licensee and the debtor and the debtor has made a payment of any amount to the licensee. The debtor has the right to cancel the contract until 12 midnight of the third business day after the first day the contract is in effect by delivering written notice of cancellation to the licensee. A cancellation described in this section is not subject to, and a licensee shall not collect, the fee described in subsection (3).

(5) If a debtor fails to make a payment of any amount to a licensee within 60 days after the date a payment is due under a contract, the licensee may, in its discretion, cancel the debt management contract if it determines that the plan is no longer suitable for the debtor, the debtor fails to affirmatively communicate to the licensee the debtor’s desire to continue the plan, or the creditors of the debtor refuse to continue accepting payments under the plan.

(6) A licensee shall not contract for, receive, or charge a debtor an amount greater than authorized by this act. A person that violates this subsection, except as the result of an inadvertent clerical or computer error, shall return to the debtor the amount of the payments received from or on behalf of the debtor and not distributed to creditors, and, as a penalty, an amount equal to the amount overcharged.

530 W Allegan Street, 7th Floor
Lansing, MI  48909-7720

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