• The proportion of credit-card accounts entering “financial hardship” programs surged in April by 3.2%, to 14.7 million, credit-reporting agency TransUnion said Wednesday.
  • Auto loans notched a similar uptick, with 3.5%, or nearly three million accounts, falling into hardship status.
  • The government’s $2 trillion stimulus bill created some options for debt-addled Americans, but “banks and lenders are looking for further regulatory guidance” as fiscal aid dries up, TransUnion said.
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Millions of Americans are struggling to pay off debt as coronavirus-led economic fallout spreads further.

The share of credit-card accounts entering “financial hardship” status spiked to 3.2%, or 14.7 million accounts, in April, according to a new report from credit-reporting agency TransUnion. The proportion spiked higher in April from just 0.01% in March 2020 and 0.03% in the year-ago period.

Auto loans posted a similar slide into hardship, with 3.5%, or nearly three million accounts, unable to cover monthly payments last month.

About 2.7 million mortgages, or 5% of such loans, are currently in financial hardship, TransUnion said. Home loan delinquencies have dropped from their year-ago readings, though usage of forbearance programs could delay an uptick in defaults.

Relief programs including forbearance and deferment plans allow borrowers to delay some payments and prioritize which debts to pay off first. The government’s $2 trillion stimulus bill opened some options for those struggling with credit products, but Congress will likely need to act further, Matt Komos, vice president of research and consulting at TransUnion, said.

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“While these programs are providing consumers with temporary relief, banks and lenders are looking for further regulatory guidance as to what next steps should be taken once stimulus packages dry up,” he said in the Wednesday report.

While the coronavirus pandemic first emerged as a supply-chain issue for global producers, it’s quickly emerged as the biggest economic threat in nearly a century. Soaring unemployment left more Americans less able to make monthly interest payments, and a years-long trend in increased borrowing stands to exacerbate the problem.

The average credit card debt per borrower reached $5,653 in the first quarter, up nearly $100 from the year-ago period, according to TransUnion. Delinquency rates and the gross number of credit cards have also jumped from the first quarter of 2019.

Borrowers aren’t without help. Several lenders have offered free forbearance options for loans and credit cards in the wake of the US outbreak. Yet the short-term solution places pressure on lenders and risks a wave of defaults once deadlines are reinstated.

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