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Transunion study shows renters are managing their debts

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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.

A new study from the credit firm Transunion shows that consumers are still managing their debts in way that may ease most landlords’ concerns, even as many are struggling with finances due to the COVID-19 pandemic.

The study found that around 25% more renters entered relief programs in March and April due to shutdown orders caused by COVID-19. But consumers have still maintained a good financial standing on their current accounts while cities and states work to contain the outbreak, the study shows.

The relief programs mentioned in the report include forbearance, deferment, and payment suspensions for various credit obligations, Transunion said.

The analysis found that renters are largely being prudent when it comes to new borrowing, and that most are not taking on new types of debt. Indeed, the percentage of renters who obtained a new source of credit fell from 37.8% in March to 36.7% in April. Moreover, more renters are paying off their credit card balances, the study found. The average credit card balance per consumer fell from $5,645 to $5,437 between March and April.

“These measures show renters have been managing their debt responsibly and rent payments have not yet been materially impacted,” the study authors said.

Meanwhile, rent payments are only slightly lower this year when compared with the last – with the study noting a 3.1% drop from 97.7% to 94.6% year over year between April 2019 and April 2020.

“Forbearance and deferment programs have given renters a leg up during this unexpected economic downturn—and it appears many renters have reduced their immediate debt obligations in the near term,” said Maitri Johnson, vice president of TransUnion’s tenant & employment business. “COVID-19 has had a significant effect on the financial health and stability of the renter population. As this situation and the economic landscape continues to evolve, early financial hardship indicators can help property owners and operators better understand consumers and make more informed decisions regarding their portfolio.”

Even so, Transunion warns landlords and property managers to exercise caution. It said that around 30% of renters whose incomes have been hit by COVID-19 say they’re worried about their future ability to pay rent.

“Right now there is little indication that renters are increasing their debt or taking on new lines of credit,” Johnson said. “The presence of federal stimulus packages have offered temporary relief for many consumers, but it is yet to be determined whether this is merely postponing payment risk increases for renters. If renters are placed under greater financial strain in the coming months, property managers should take a deeper dive into resident behaviors to better forecast the likelihood of future rent payments while actively building trust with their community.”

JUNE 18, 2020 BY MIKE WHEATLEY

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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
877-999-6442

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