TransUnion Q2 2020 Industry Insights Report

TransUnion Canada’s Q2 2020 Industry Insights Report shows that the impact of the COVID-19 pandemic continued to affect the consumer credit market as consumers and lenders braced for uncertainty. Access to credit slowed as overall origination of credit products fell. Existing credit consumers slowed usage, as revolving balances (cards and lines of credit) dropped, partly due to reduced consumer spending and deleveraging by certain segments of consumers. While use of credit slowed and balances dropped, delinquency and insolvency rates improved, driven in part by the widespread use of financial accommodation tools, such as deferrals.

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90+Day Delinquency Rate YoY Changes for Non-Mortgage Loans

90+Day Consumer Delinquency Rate

The Q2 Industry Insights Report shows that that the number of consumers with delinquent balances dropped, reflecting the impact of both government support and the provision of financial accommodations by lenders. Overall, consumer non-mortgage delinquency rates have declined by 10 bps YoY, to 1.7%. The reduction in delinquency was driven, by credit cards and auto loans with drop in consumer delinquency rates of -14 bps and -3 bps respectively. Lines of credit and mortgages saw slight increases in delinquency rates and personal loans saw a much larger increase in delinquency. Personal loan growth has been partly fueled by alternative lenders who have been slightly more aggressive in issuing personal loans to Below Prime consumers (consumers with CreditVision scores below 720).

“We are finding that Canadian consumers may be using their existing savings and investments to supplement income during this pandemic. Many Canadians are opting to dig into their personal savings and investments rather than taking on additional debt, which could partly explain the general decline in new originations. There are obvious longer-term implications to this approach, but this is an unprecedented situation, and we will have to see how sustainable it is if the economic recovery is slower to materialize.”

- Matthew Fabian, Director, Research and Industry Insights

Average Consumer Balance, by Product*

Forcast

*Represents the average balance held by a consumer across each type of product (consumers can have multiple instances of same product)

Matthew Fabian

“While overall non-mortgage credit balances declined, balances for Millennials and Gen Z consumers grew 0.8% and 5.9% respectively. It is harder for younger consumers to absorb economic shocks like this as they have fewer options to maintain cashflows, like savings, investments or retirement funds. As a result, it is likely that more of these younger consumers have been forced to rely on credit.”

- Matthew Fabian, Director, Research and Industry Insights

Forcast

Delinquency rates have been mitigated by lenders through the provision of financial accommodation tools like deferrals. Approximately 2.6 million Canadians (or 9.2% of credit consumers) have at least one active deferral, with higher-risk consumers more likely to be taking advantage of financial accommodation tools. 15.2% of Subprime consumers (consumers with CreditVision scores between 300 – 639) and 12.8% of Near Prime consumers (consumers with CreditVision scores between 640 – 719) have taken a deferral on at least one credit product or loan, while only 6.1% of Super Prime consumers (consumers with CreditVision scores above 800) have opted to take a deferral.

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