Consumer Credit in the US

2020 IMPACT

COVID-19 upends economy, causing deep uncertainty

COVID-19 has rocked the US economy, forcing non-essential businesses to close as consumers stay home, leading to an unprecedented spike in unemployment. In March 2020, as the pandemic took hold, Congress passed the CARES Act, which enhanced unemployment benefits by USD600 per week until July.

Consumer spending contraction causes decrease in demand for credit

Consumer response to the economic downturn driven by COVID-19 has largely been to cut discretionary spending across the board. The combination of stay at home orders and industry shutdown has severely limited the opportunity for consumers to spend.

Loan forbearance amidst government support

Unlike the Great Recession of 2008-2009, which hit the liquidity of banks and other lending institutions particularly hard, lenders today remain reasonably well equipped to grapple with surging payment deferrals and loan delinquencies from cash-strapped consumers. Some banks offered forbearance on auto and home equity loans early in the COVID-19 crisis, where demand for lender accommodation was high.

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