CFPB Reports Credit Applications Have Recovered to Pre-Pandemic Levels; Releases Tool to Help Renters And Landlords

On July 27, 2021, the Consumer Financial Protection Bureau (CFPB) provided insight into the economic recovery by issuing a press release regarding the state of credit applications. On July 28, 2021, to further the goal of helping consumers navigate the (hopefully) post-pandemic world, the CFPB issued a press release unveiling a tool to help renters and landlords access federal assistance.

Credit Applications

According to the CFPB’s July 27, 2021 press release, by May 2021, consumer applications for auto loans, new mortgages, and revolving credit cards had mostly returned to pre-pandemic levels. Prime and near-prime consumers are driving the recovery; subprime and deep-subprime applications remain down.  As with previous reports from May and December 2020, the CPFB noted an increase in credit applications, particularly from borrowers with below prime credit scores in conjunction with federal stimulus payments.

Key findings by the CFPB include:

• Auto loan inquiries saw a drop of 52 percent by the end of March 2020 and returned to their usual pre-pandemic trend by January 2021.

• New mortgage credit inquiries saw a smaller drop in March 2020 compared to other types of inquiries and then surged. Subsequently, inquiries have exceeded their usual, seasonally adjusted volume by 10 to 30 percent, reflecting the unusually high activity in the mortgage market throughout the pandemic.

• Revolving credit card inquiries took the longest to recover from the initial March 2020 decline until March 2021, when these inquiries reached their usual levels.

• Consumers with deep subprime credit scores showed the largest decline in auto loan inquiries compared to prior years, followed by inquiries from consumers with subprime credit scores. These consumers also showed declines in new mortgage and revolving credit card inquiries.

• Changes in auto loan and new mortgage applications were quite varied across the states, while changes in credit card applications were generally uniform.

Online Tool to help Renters and Landlords

On July 28, 2021, the CFPB released an online tool to help renters and landlords impacted by the pandemic easily find and apply for payment assistance for rent, utilities, and other expenses. The Rental Assistance Finder will make it easier for renters and landlords to connect with federal, state, and local rental assistance programs in their area.

According to a CFPB analysis of Census Household Pulse Survey data  from June 23–July 5, 16 percent of adults living in households who rent said they are currently behind on their payments. Of adults living in households behind on rent, 49 percent, or approximately 3.6 million of them, say that eviction in the next two months is somewhat or very likely.

insideARM Perspective:

The last eighteen months or so have led to uncertainty throughout the accounts receivable management industry. While the news regarding credit applications will likely not have an immediate impact on the ARM industry, a return to some stability and normalcy is surely a welcome sign.

Conversely, the online tool offering renters and landlords a resource to find assistance in their areas might have an immediate impact on consumers and the ARM industry. Many consumer advocates believe the next economic crisis is going to be related to evictions, as there are a significant number of consumers who are not prepared to pay now-due back rent and will be evicted from their homes. 

Aside from the obvious impact to consumers, should this scenario come to fruition, the accounts receivable management industry will likely feel a significant impact; people who don’t have a place to live will not jump at the opportunity to pay a delinquent bill. Billions of dollars have been made available for consumers and landlords during the pandemic, should the online tool do what the CFPB hopes it will do; it will mitigate the impact on consumers and the financial sector.