COVID-19 Default Wave December Update
Many were hoping that restrictions caused by the pandemic would be over after a month or two. Unfortunately, COVID-19 has gripped the world in ways we could have never predicted. With outbreaks and deaths at all-time highs, many businesses are still closed or are going back into shutdown mode.
These shutdowns are particularly affecting individuals in the service and retail industries, who generally see a surge in revenue this time of year due to the holidays. Additionally, millions were expecting to see relief from a stimulus package in the last few months; however, Congress has still not been able to reach an agreement.
Stimulus Package Updates and New Deadlines
There are a few critical areas that Congress members are currently debating:
Unemployment – Democrats favor higher unemployment benefits and would prefer to continue offering the $600 per week addition that currently exists. However, Republicans are not in alignment and would like to cut that down to $300 per week instead – or cut it out altogether if they provide stimulus checks.
Stimulus checks – Currently, it sounds like there may not be a stimulus check for individuals in the next aid package. Republicans recently proposed cutting unemployment altogether and instead offering one-time $600 stimulus checks per person and per child. Democrats are unlikely to agree with this course of action since they prefer higher benefits for unemployment and stimulus checks. If they cannot come to an agreement, this check may have to wait for the next aid package since businesses currently need help.
Student loan payments – President Trump extended the student loan debt moratorium through the end of the year a couple of months ago and US Secretary of Education, Betsy DeVos recently extended it into January. However, if Congress does not come to an agreement soon, payments could resume in early 2021.
Rent and mortgage moratoriums – These moratoriums could also be up at the end of the year, resulting in mass evictions and foreclosures if Congress can’t make a decision by January 1.
What Does All This Mean for Lenders?
The winter months are likely to bring an even higher spike in COVID-19 cases and deaths. As these cases increase, states will likely begin to go back on lockdown, resulting in even more people being out of work.
In addition, the administration change that is likely to occur in January could mean changes in federal policies or even a nationwide shutdown period of two weeks or more.
Ultimately, the future is uncertain – but what is certain is that being prepared is always better. With months of talks over a stimulus bill and still no resolution, there is a good chance that the talks will continue into January.
For borrowers and lenders, this means the potential for defaults on credit cards is going to increase exponentially as more bills pile in and fewer programs exist to help with those bills.
Lenders should prepare by reviewing all of their default policies and having a plan in place for helping cardmembers either get back on their feet or get a plan to start paying back debt that works for them.
Debt Management Plan (DMP) Processing and Credit Counseling Management
If you’re feeling pressed for time or need help with process creation, Peregrin has the tools you need. Give us a call today 1-800-231-2493 or contact us on the website to set up a quick consultation.