Working with borrowers hit hard by financial hardship

It’s been a tough year for millions of families. The coronavirus and subsequent social distancing measures put in place to help slow the spread of the disease caused major disruptions across nearly all industries in 2020. Although we have somewhat recovered from the initial shock of job losses in the spring, mass furloughs and layoffs have negatively affected millions of Americans—between February and August 2020, our nation lost nearly 11.6 million jobs. With government stimulus funds drying up and sluggish movement from Congress on further relief spending, this has created very real economic hardship for many families, which in turn is driving up delinquency rates.

When your collections team encounters a financially burdened borrower who genuinely wants to make his or her loan payments, but is going through a tough time financially, there are tactics your collections team can use to help them. In this blog post, we’ll discuss strategies for working with account holders hit hard by financial hardship.

A Snapshot of Rising Economic Hardship in the Auto Lending Industry

Accounts in hardship are those that have been affected by a natural or declared disaster; reported as in forbearance; reported as deferred; or reported as having a frozen account status and/or past due notice. According to industry analysts at Black Book, “The number of accounts in hardship jumped substantially in April and kept increasing through June across all risk groups. The numbers stabilized in July and currently, about 4.3% of all accounts are in hardship, which is almost a 1,400% increase over last year. As deferrals expire in the upcoming month, coupled with a high unemployment rate, lenders expect a large portion of these hardships to become delinquencies.”

 

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