The new realities of the COVID-19 pandemic are creating major economic and financial distress for consumers across the globe. Many jobs in the Canadian economy are already affected or at risk. To help organizations make decisions at a time when information on consumer impact is still emerging, TransUnion is conducting research on consumers’ perceptions, expectations and ability to pay their bills. Here’s an overview of the main findings from the Wave 5 Report — based on data collected the week of May 25.
From panic to preparedness
With the crisis beginning to lessen slightly in June, a more resolved consumer base, augmented by government relief and financial forbearance programs, seems to be shifting mindsets from panic to preparedness.
Fifty-five percent say household income has been impacted
The proportion of consumers negatively impacted by COVID-19 dropped four percentage points to 55%, the lowest rate since the survey started. This may well be attributed to a combination of policy support, bank forbearance programs and consumers adjusting to the new normal.
Consumers in the Gen Z cohort — many of whom are students or new to the workforce — continue to register the greatest impact. Wave 5 data shows 69% indicated a negative impact (up nine points from our previous survey) and are among the only generational cohort to increase during the period.
Fifty-two percent affected by reduced hours or job losses
Smaller businesses are still being affected by lower traffic or inability to reopen.
Of the consumers who are financially affected by COVID-19:
- Thirty-four percent indicated this was due to a reduction in working hours (up from 29% in the previous survey)
- Eighteen percent stated they had lost their job (down from 25%)
- Sixteen percent were small business owners reporting a loss of income or having to close (up from 11%)
Sixty-seven percent concerned about ability to pay bills and loans
Sixty-seven percent of consumers who say they have been affected financially are concerned about their ability to pay bills and loans. This figure is similar to the previous survey.
Impacted Canadians said they will not be able to pay:
- Credit card debt (46%; down from 48% in the last survey)
- Auto loans (21%; unchanged)
- Personal loans (15%; down from 19% in week three)
- Medical bills (10%; down from 11% in week three)
There’s a fundamental shift in household budgets as negatively impacted consumers are using unemployment benefits or other government subsidies, and cutting back on savings and investments. Those indicating they’re not impacted are making more modest decisions, such as minimizing discretionary spending.
Budget shortfall is C$832.10
On average, consumers who are affected expect they’ll be short by C$832.10 when paying bills or loans. This amount is down from C$951.00 in the last survey, and the high of $1,035 recorded in late April.
Consumers who were impacted expect they’ll not be able to pay their bills or loans in seven weeks — down from just below seven and a half weeks in the previous survey, and likely a reflection of the extended nature of the pandemic and lockdown.
While 43% of consumers impacted say they can maintain payments for up to three months, those able to maintain payments for less than two weeks increased six points, to over 20% of the population. That window shrunk the most for Millennials and Gen Z.
Over thirty-three percent plan to pay only a portion of bills or debt
To preserve cash flow, consumers are paying down less against existing debt. Over one in three affected consumers say they’re paying only a partial amount. Some are borrowing against investment and retirement funds, with 31% (11% of Canadians) using funds from these accounts.
- Twenty-seven percent plan either to borrow money from a friend or family member (23% in our previous survey)
- Nine percent say they will take out personal loans for short-term liquidity (unchanged from the last survey)
- Fourteen percent say they don’t know how they are going to pay (down from 19%)
Forty-two percent discussing payment options with lenders
Only about 10% of those affected (4% of Canadians) are using the pay holidays and deferrals offered by loan providers, while 42% are discussing payment options with lenders.
Business loans are the most common product for financial accommodation (23%), followed by private student loans (22%), auto leases (17%), and mortgages (11%).
Of consumers with financial accommodations:
- Almost sixty percent are confident they understand the terms and conditions
- Forty-six percent plan to pay the balance in full at the end of the term or create a repayment plan
More targeted consumers are acting on fraud schemes
While the overall proportion of responders targeted by fraud has dropped from nearly 30% two months ago to 25%, there’s been an increase in those who acted on and became a victim of a fraud scheme. The most common schemes are phishing, charity or fundraising scams, and third-party selling scams.
Yet, 21% of consumers surveyed say credit monitoring during the pandemic is extremely or very important. A small proportion are monitoring their scores daily (2%) or weekly (9%), while 32% say they monitor their credit score at least monthly.
We’ve developed several resources to assist businesses and consumers in navigating this difficult time. To learn more about our consumer research and download the latest reports and infographics, visit transunion.ca/financial-hardship-study