Financial health dipped in 2022, and consumers aren’t ready for a downturn: CFPB

Americans’ financial health slid by some measures in 2022 amid rising consumer prices, the end of pandemic-era government benefits, and even a return to riskier alternative financial services like title loans for some people, according to survey data out this week from the Consumer Financial Protection Bureau

The survey, which was mailed to 16,800 consumers and garnered 2,125 complete responses, reflects consumers’ financial well-being through January and March of this year — a period of massive rent increases nationwide, and just before the annual inflation rate peaked at 9.1% in June.

The responses showed that although a tight labor market, pandemic-era relief programs like expanded unemployment benefits and stimulus checks, and lower consumer spending might have helped out households earlier in the COVID-19 crisis, between “February 2021 and February 2022, financial well-being had largely returned to where it was in 2019,” the consumer watchdog agency said in a report on the data Wednesday.

‘Many consumers are not financially prepared for a disruption to their main source of income, even as unemployment remains low.’

— CFPB on its report findings

In particular, the financial state of Hispanic consumers, consumers younger than 40 and low-income renters “deteriorated rapidly” in that time frame, the CFPB said. That’s especially concerning as the U.S. prepares for a potential recession and period of higher unemployment next year.

“Many consumers are not financially prepared for a disruption to their main source of income, even as unemployment remains low, according to report findings,” the CFPB said in a statement about its survey data. “Nearly 37% of households report that they could not cover expenses for longer than one month, even with accessing savings, borrowing money, selling assets, or seeking help from family and friends.”

The same was true for half of Black and Hispanic households. 

Meanwhile, the credit-card debt that decreased rapidly in March 2020 and again after the arrival of stimulus checks in 2021 ticked back up in 2022, though “real credit card debt [was] still more than 10 percent lower for all income groups in September 2022 than it was in December 2019.”

“However, for some groups, credit card debt has been increasing after falling early in the pandemic,” the CFPB added. “The real credit card debt of Hispanic consumers and consumers under age 40 in February 2022 has been increasing rapidly since around June 2021.”

Nearly 36% of U.S. households also reported difficulty paying at least one bill or expense in the previous year as of February 2022 — lower than the pre-pandemic level, but slightly higher than the percentage of people experiencing that difficulty in 2021, the CFPB said. 

And a “small but significant fraction of consumers” turned to payday, auto title and pawn loans to cover their needs, despite the use of those services declining earlier in the pandemic. 

“Between the 2021 and 2022 surveys, use of these financial services rebounded to their pre-pandemic levels or higher,” the CFPB said. “The rise in auto title loans, in particular, increased by nearly 2.8 percentage points although the confidence intervals on this estimate are particularly large.”

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