CHICAGO, IL. -- People are struggling to pay their monthly bills, according to research from TransUnion. For the majority of households across the U.S., personal finances are being unexpectedly strained as a result of the coronavirus health crisis. From reductions in working hours and hourly wages to lost jobs and closed businesses, the impact on U.S. household’s income has been swift and severe.
To gain a deeper understanding of these dynamics, TransUnion is conducting a Consumer Financial Hardship Study. The Consumer Financial Hardship Study is a multi-wave study tracking changes over time. TransUnion has conducted ten waves of the study, analyzing responses from over 24,000 consumers. Wave 1 of the study was conducted the week of March 16, 2020 and through June 30, 2020 TransUnion’s Consumer Financial Hardship study helps markets understand how households are being impacted financially by the COVID-19 pandemic. The study offers utility companies a focused understanding of the impact on their business. TransUnion Industry Solutions is also helping utility companies on an ongoing basis by providing access to rich information detailing these trends.
Utilities nationally are under pressure from financially stressed consumers as a result of COVID-19 and its attendant income losses. Determining an accurate projection for monthly revenue while reviewing customers’ ability to make payments in a timely fashion is critical. With the pandemic extending into summer months, actionable data is more important than ever. TransUnion helps in this capacity by providing a clear picture of customer’s financial health, and thereby enabling utilities to take the right actions and make better decisions in real time.
More than half of US consumers have had their income negatively impacted by the coronavirus pandemic. In the latest wave survey (June 30, 2020) 55% of U.S. households indicated that their income has been negatively impacted.
As a result of this negative financial impact, a significant number of households are concerned with their ability to pay their current bills and loans.
After being relatively stable at approximately 66% for several weeks, the percent of consumers indicating that they are concerned with being able to pay their current obligations has increased in back-to-back waves and now stands at 72%. Government stimulus checks and enhanced unemployment benefits have been primary sources of funds to keep many distressed consumers solvent. However, at the time of this posting, the majority of consumers have run out of their first government stimulus money and there is uncertainty around the timing of a second round of stimulus checks. In addition, it is unknown whether enhanced unemployment benefits will be reinstated after expiring at the end of July. In absence of further government stimulus, TransUnion expects the percent of consumers concerned with their ability to pay their bills will continue to rise.”
As stimulus money runs out for many and enhanced unemployment benefits are scheduled to expire at the end of July, we expect this number will continue to rise in absence of further government stimulus.
As part of its analysis, TransUnion looked at holders of different financial and non-financial obligations and the percent that hold each type of obligation that indicated they will not be able to pay.
Relative to other categories of obligations, the risk of nonpayment for utility bills is much lower. 16% of those with a utility bill indicate they will not be able to pay their utility bill, which is significantly lower than the percent unable to pay rent or for credit obligations like personal loans or student loans. Only Mobile/Cell and Internet bills have a lower percent of consumers saying they will not be able to pay.
The loans or bills that consumers are unable to pay differ based on a number of factors including the importance of that specific bill in their daily life, the absolute dollar value of the bill, and whether they have received some type of financial accommodation for a given bill. Given the importance of household utilities and the size of the payment compared to other obligations, utility payments appear to be in a relatively good payment position when compared to other obligations. These findings provide insight into the payment hierarchy that consumers have relative to their various payment obligations.
Since March 2020 when Transunion began the Consumer Financial Hardship study, there have been an increasing number of negatively impacted consumers who have reached out to lenders and service providers to discuss payment options. This started at 40% of consumers in March and has risen to 60% in the most recent wave. However, a much smaller percentage, only 23%, have actually enrolled in a financial accommodation such as a deferral, forbearance or payment holiday.
The types of debt/bills they have received assistance with differs. At 33%, student loans have the largest percent of consumers who have received some sort of assistance. This isn’t surprising since, in many cases, student loan lenders automatically enrolled borrowers into a program and didn’t require that consumers opt-in.
At only 6%, the percent of consumer that have enrolled in a financial accommodation for their utilities is the lowest (tied with telecom) of any of the financial obligations analyzed. This speaks to the importance of utilities to consumers and that they are prioritizing their budgets towards these bills.
For more information on how companies are being impacted download the most recent Financial Hardship study or access reports for all weekly waves.
SOURCE: TransUnion
