CHICAGO -

In an effort to gain more timely information about how consumers are being impacted by COVID-19, TransUnion compiled a global report examining financial hardship and found that in the U.S., 87% of consumers who participated in a survey said they have a plan to navigate their challenges.

Charlie Wise, head of global research and consulting at TransUnion, offered more details about that plan, especially how auto-finance commitments fit into that strategy.

But first, Wise explained to Auto Fin Journal why it was important for TransUnion to orchestrate a revamped method for gaining information.

“It’s an interesting question that you raise from the standpoint of these are definitely challenges we’ve been thinking about dealing with, particularly when you look at a lot of the data that we typically work with, which is the credit data reported to us by banks, lenders and those actually in the credit market,” Wise said during a phone interview last week. “You think about the way that gets reported to us, there’s quite a lag in terms of when events actually occur to when things start to show up on credit files that are indicative of what’s actually going on in the market.

“When you think about things like delinquency, if someone is losing their job in March and then can’t make their April payments, that’s then reported delinquent in May and basically you’re into June before you’re reporting on something that happened back in March,” Wise continued. “Any earlier than that, you’re essentially seeing what that consumer’s status was as of time when they were employed and able to make their payment.

“It’s obviously very important data. It’s good to see. But if we want to understand on a much timelier basis; what’s dynamically happening in the market,” Wise went on to say. “We’re having to get more creative in terms of the things we look at, which this survey and study are intended to do exactly that, try to get that real time view of consumers. What are you experiencing right now? What bills can’t you pay right now and how are you responding? This is an opportunity for us to hear directly from consumers.”

Overall research findings

That creative way resulted in TransUnion’s latest report that showed millennials’ finances are being particularly impacted by the coronavirus pandemic.

TransUnion indicated the COVID-19 pandemic is causing similar financial hardship for consumers around the world, but its new research showed that millennials (those persons between the ages 26-40) are being challenged the most. A just-released including seven regions on five continents found that three in four millennials (76%) worldwide indicated their household incomes have been negatively impacted by the pandemic. This compares to 64% for all other generations.

In the weeks since the World Health Organization (WHO) declared the coronavirus (COVID-19) a pandemic on March 11, TransUnion said the company polled thousands of consumers in the U.S., Canada, Colombia, Hong Kong, India, South Africa and the U.K. to determine the impact of the pandemic on their finances. Research for the global report was conducted in mid-April and observed how COVID-19 has impacted millions of global consumers differently based on employer size, generational differences, government interventions and income dynamics.

“COVID-19 has brought about unprecedented financial challenges to people and businesses around the globe,” TransUnion chief executive officer Chris Cartwright said. “A thorough and fact-based understanding of these impacts and how best to respond to them is second only to our health and safety in terms of society’s successful recovery from this global pandemic.”

TransUnion reported a clear outcome from its research is that many consumers are worried about their finances, but the millennial generation is under the most stress, according to the report titled Global COVID-19 Consumer Financial Hardship Study.

In the seven regions featured in the study, 22% of millennials with household incomes negatively impacted have lost their job due to COVID-19 compared to 16% for all other generations. Just under half (45%) of millennials with incomes negatively impacted have seen their work hours reduced compared to 35% for the rest of the group. Impacts observed globally are similar in the U.S.

Analysts mentioned this pressure is compounded by the fact that 61% of millennials said they have dependent children living at home — a much greater rate than the 39% noted for other generations. In the U.S., 58% of millennials in the survey have dependent children living at home compared to 36% for other generations.

Millennials who have seen their household incomes negatively impacted also are having more pronounced problems with certain debt obligations. For instance, 63% with negatively impacted incomes report they will not be able to make their rent or mortgage payment compared to 54% for other generations. In the U.S., 61% of impacted Millennials are unable to pay for shelter compared to 57% for other generations.

“Millennials are the first generation to be fully immersed in mass-market digitalization and are savvy at securing credit,” Wise said. “While Gen Z can say the same, the big difference is that many millennials are more settled in their careers and are beginning to approach the peak earning period of their lives.”

Ingredients of financial plan

Whether they’re a millennial or a baby boomer, TransUnion discovered 87% of U.S. consumers who participated in the survey said they have a plan to keep their finances organized. Wise elaborated about the ingredients of that plan that might impact their auto-finance obligation.

“Specifically, when we looked at the plan, the questions gave people the option of selecting all that apply,” Wise said. “If you think about what’s going on right now, it may not be a single source of either income or relief that they’re looking for. They’re probably patching together several of these things. We look at all that apply.”

Wise noted that 14% of U.S. consumers mentioned a payment holiday went into their plan while another 14% said they’re looking to refinance or renegotiate current payments.

“You wouldn’t necessarily add those up because a lot of consumers might be looking at those at the same time,” Wise said.

Wise went on to mention other plan elements such as nearly half of consumers intending to use federal government stimulus funds for monthly payments and 35% looking to dip into saving accounts.

When it comes to credit cards, Wise pointed out that 31% of survey consumers said they would not pay off their entire balance, adding more ingredients to the overall financial plan.

Future expectations

During the conversation with Auto Fin Journal, Wise addressed what he and the TransUnion team see as the most important components to economic recovery.

“The first is simply going to be is when consumers are going to be able to leave their homes and safely get back to work. That is the crux of this,” Wise said. “This is not a situation like 2008 and 2009 where people are out of work because of a major economic collapse caused by essentially problems with the financial markets or problems with the organization. This has been driven by a closure of essentially our whole economy. Consumers can’t go to work so they can’t earn money. That’s the crux of it. There are many of us fortunate to be able to continue to work at home but many more have been furloughed, laid off entirely or seen their hours cuts. This is cutting into income and what we see in the survey.

“Then really the question is how quickly are those businesses going to be able to reopen and bring people back on,” he continued. “If this happens in the next 30 to 45 days, it will be a much different situation than if we’re still not able to interact for another six months or more. That’s really what it comes down to.

Wise also mentioned the role financial providers have, too.

“When consumers do come back, they’re going to need credit and be able to borrow,” Wise said. “In our data, we’ve seen a lot of things that have been deferred, like home purchases, auto purchases, vacations. Certainly, a large portion of our population are going to want to start doing those things and very quickly. It’s very important that lenders be ready and positioned to open up their credit spigots to allow people to buy the cars they’ve been deferring or buy the homes they’ve been saving for. It’s important that lenders be reticent to hit the go switch quickly, as well.”