Believe it or not, it’s been over a decade since the last global economic crisis. Remember the collapse of the United States financial and subprime mortgage markets in 2007 and 2008? Remember thinking we were entering a period of decline comparable to the 1930s—or worse? These days, judging by indicators such as employment and GDP growth, the economy appears healthy. In retrospect, the so-called Great Recession doesn’t seem so great or… recessive.
Yet, many Americans don’t think of the Recession as a distant memory.
For millions of US households, financial stress continues to be a daily, lived reality.
“Individuals in the $50,000 to $75,000 range report the largest increases in wages over the last year. That sounds pretty good in a market in which wages are stagnating — with base comp rising at 0.5 percent and pay (including bonuses) decreasing by 0.3 percent, despite unemployment levels residing at their lowest levels in 23 years.
Perhaps then, not surprisingly, 83 percent of consumers report that their financial circumstances have improved or stayed the same since last year.
Yet digging deeper exposes some problems.
Despite these seemingly sound, strong financial fundamentals, more than a third of consumers report falling behind on bills, up 6 percent from this time last year, in an economy that is booming with inflation rates below 2 percent for more than eight years.
And that’s not a ‘Geez, I forgot to pay the credit card bill since I was away for a week’ late paying the bills situation.
No, this is different and more concerning — telltale in an era when auto bill pay makes paying bills automatic and being late can reflect a conscious decision to delay or skip a payment entirely.
Those delinquencies also seem to have little to do with income or educational stereotypes: Those with some of the highest incomes and educational levels are among those with the most precarious financial circumstances.
In fact, when you look closely, those most at risk of a financial crisis appear more like those who are totally shut out of the credit markets due to chronic delinquencies than a cursory review of their financial profile might otherwise suggest.”
That’s according to the July 2018 Financial Invisibles Report™. The report, which PYMNTS.com and Unifund conduct every quarter, surveys approximately 2,000 Americans about their financial habits and circumstances. It’s an illuminating look into consumers’ lives—and required reading for the consumer finance industry.
The most recent Financial Invisibles Report paints a picture of a country in which 3 out of 4 population strata are struggling to make ends meet.
From the people shut out of the market due to bad credit to the ones who have earned “second chances” or are living on the edge, 42% of all consumers are experiencing precarious situations. Many live paycheck to paycheck, face considerable debt, feel susceptible to catastrophe, or are likely to lean on consumer credit to pay bills. Even those who seem calm about their finances aren’t immune to delinquency. PYMENT.com’s Karen Webster writes:
What does this mean for lenders?
While consumer protection advocates may see more reasons to rail against credit industry, these findings arguably show that access to credit—including oft-maligned alternative credit products—is more important than ever. There’s opportunity here for innovative lenders committed to doing the right thing for their customers. If that sounds like your organization, learn how Compli can keep you compliant now and for whatever comes next.